energy security, and then president obama marks 20 years that the united states and the soviet union reduced nuclear weapons. and then deductions that could be part of the negotiations over the so-called fiscal cliff. >> this weekend on c-span3's "american history tv," follow harry truman's eldest son, as they prepared to mark the dropping of the atomic bomb on 1945. >> i know everyone has their own view. i don't want to argue survival. i think we're past that.

i want to do what i can to see that this doesn't happen again. >> clifton truman daniel will join us to discuss the inspiration for his trip sunday at 9:00 p.m. eastern on c-span3. >> a report by the group securing america's future energy says the greatest threat to national and economic security is dependence on foreign oil. members of the group, business political and retired military leaders are suggesting a plan of maximizing oil and gas production, reducing consumption, and improving conservation as a way to boost revenue and reduce our debt. this is a little less than an hour and a half. >> good morning, everyone. thank you all for coming. i especially want to thank the

members of the leadership council that could be with us here today. they've been a distinguished group of people working on this issue since 2006. we're nothing without their credibility as the great c.e.o.'s, entrepreneurs and military leaders of our time. i also want to give a special thanks to the staff at securing america's future energy. really we stand on their shoulders, all of us, and the hard work that they -- and the time that they spent to put these reports in conjunction with the energy security leadership council, the policy staff, jonna hamilton, james, sam, leslie, the staff that put this together, and julie, our political staff and the rest of the team at safe. we stand at a great time of energy revolution in the united states. we've seen more production than we've ever seen before. the most production in the last couple of decades of

year-on-year growth. oil imports are falling cullly and the demand for oil -- actually, and the demand for oil continues to decline based on fuel economy standards and other reasons. and yet, with this revolution we still continue to have a problem. and i think the report that we're releasing today, the national strategy for energy security and its subtitle really says it all -- harnessing american resources innovation. and the first point is, how do we leverage this abundance we have in the united states to our maximum benefit? at a time when washington is talking about our fiscal crisis i'd say that the relationship of our oil needs to this crisis itself are close. it might not solve our fiscal crisis but clearly it's a necessary ingredient. every recession in the history of the united states in moden

times has been preceded by or happening concurrent with an oil price spike. if we don't have continued growth we can cut all we want and raise revenue all we want, but we'll never find a way to solve our fiscal troubles. and i think this report really looks at how do we leverage this great abundance, this great blessing in the united states, both of our resources and of our innovative skills to help the country through these times and put us in a good footing for the next 50, 100 years. and secondly, i think this report really is the beginning of a process of creating an effective deep and stable bipartisan consensus on energy policy, in a town where everything is about the zero sum game. we are trying to escape that zero sum game. and we see the oil security as a unifying vision where people do not have to compromise their core principles.

if one looks at oil security, the environmental community can see a reduction in the amount of carbon and an improvement in the environment as well as national security hawks conservative can see the idea of producing more in our country, leaving more resources at home and spending less of our wealth abroad. so we see this as a way of not creating a zero sum game but doing something different, which is create ago consensus in order to get something done in the next congress. and so we're excited for the next congress. we're excited to work with all legislators and the administration to implement these recommendations and see it through to their fulfillment. right now i'd like to call mr. smith, fred smith, who's the championship, c.e.o., president and founder of fedex. he needs to introduction. he burns about 1.5 billion gallons of fuel a day -- a

year, sorry. [laughter] that would really be a problem. but the truth is, you know, the fedex and what it's done in our economy is groundbreaking. they are the clipper ships of the modern age, and what they see both in terms of the economic growth of our country, you know, because they touch every industry, as well as provide the transportation to make our economy grow and thrive, i think he's well suited to discuss this issue. i thank him particularly for being the co-chair of this energy security leadership council since 2006 and for joining with general kelly and myself to do this. thank you. [applause] >> thank you, robby. as he just mentioned, i became involved in the energy security

leadership council out of self-interest primarily, because of the energy intensity of fedex, which operates over 90,000 vehicles and almost 700 airplanes. i was recruited to this endeavor by our chairman, general p.x. kelly, who correctly pointed out to me when i first came aboard this effort some years ago that after nuclear proliferation and terrorism our dependence on imported petroleum, particularly from inhospitable areas of the world was our largest single national security issue. hence, the synthesis of a group of business executives like myself and david, the c.e.o. of waste management, herb kelliher of southwest airlines and other major companies that use a lot

of energy, and retired four star military and naval officers who understand clearly this nexus of economic security and national security. regarding the latter, we've been involved, as everyone here knows, in the middle east in the past quarter century in three shooting wars, at great tragedy for our country with the young lives lost and the treasury expended and the foreign relations issues that it has engendered, and at the end of the day all roads lead back to this dependence on imported petroleum. in 2005 we were importing about 60% of our daily petroleum needs and we had about 20

million barrels of usage in this country. today we're down to about 40% in terms of our petroleum usage per day being imported. but it's important to recognize that despite that fact we're still spending about $60 billion a month to import that petroleum. now, this problem has been going on for a long time, since 1973 in the first era of the oil embargo. as robby mentioned, every single economic contraction this country has had, including the financial meltdown in 2008 was precipitated by a run-up in oil prices. the oil market is not a free market. the marginal barrel of production is controlled by the opec cartel, the organization of petroleum exporting countries, which meets twice a

year to establish quotas in order to keep prices at an acceptable level for the opec exporters. the national oil companies of opec and other countries around the world hold the vast majority of oil reserves, over 80%. they produce only 40% of the world's petroleum every day. there's a chart in the report that you have that shows us graphically. if there's ever an example of a market that is not free, it is that. nobody operates and acts in that manner in a purely free market. in fact, if opec were doing what it does abroad in this country, it would be a crime and a violation of our antitrust laws. so the prescription that the

energy security leadership council came up with several years ago, which was very impactful in the energy security -- independence and security act of 2007, was it? 2008? was based on our report in 2007, which said that the united states should maximize its oil and gas production, that it should significantly reduce consumption and improve conservation, which led to the direct support of the eslc for the -- from the eslc for the re-substitution of fuel efficiency standards, which had not been done for 20 years and third, to develop to the extent that it was economically viable, a biofuel substitute for petroleum. this new report that we're releasing today continues these

themes with a couple of important caveats. the most important is the fantastic technical revolution that has taken place since our original report and our intermediate reports until this one today by the so-called fracking revolution for oil and gas. and at the same time the significant improvement in national efficiency that's been brought about by technology and the new fuel efficiency standards that were enacted by the bush administration first, and then, of course, were increased by the obama administration. it's important to recognize that the eslc report is not political in any way, shape or form. it endorses things that are heartily supported by the right , in some cases, and on the other hand that are supported by people on the left. it's important to recognize you

can't just take the parts that you like. you have to take the wholistic approach, which is to, again, maximize u.s. production and to at the same time significantly reduce consumption partly by diversifying our transportation sector away from petroleum. now, the last thing i'll say before we sit down is it's important to recognize that petroleum use in transportation is the pivot point of this entire problem. about 70% of our 18.7 million barrel per day use of petroleum in this country is for transportation, and transportation is fueled about 93% of the time by petroleum. so if you want to reduce the united states' dependence on imported petroleum and the related geopolitical issues

that that causes, particularly in an era where rising demand for petroleum in china and india and elsewhere is creating potential conflict for these resources, then you have to recognize that transportation has to be diversified away from petroleum where the prices are set on the world market. canada and norway have been net petroleum exporters, but they pay in those countries the same market price for a gallon of gasoline as we do. so you must diversify, and that includes electrification of short-haul transportation, light-duty trucks and vehicles, and the adoption of natural gas either in its lick if i quide or compressed forms for heavy-duty vehicles and over the road vehicles. but taken as a whole if the

recommendations of the eslc are adopted, the united states has the potential to reduce our dependence on imported petroleum and thereby reduce our national security risk to improve our balance of payments and about half of our balance of payments deficit remains petroleum, and to increase our g.d.p. by the maximization of these activities in the united states rather than exporting our dollars abroad. so thank you very much and i think we can sit down now or -- yeah. >> thank you. give us a moment to take our seats. [applause] >> ladies and gentlemen, our panel discussion is about to begin, featuring senator lamar alexander, senator roy blunt,

and our moderator, christine romans. >> can you hear me now? there we go. good morning, rn. -- all right. so i'm a lazy moderator. i've warned everyone. we want to get the ball rolling and talk about this report, talk about the future of energy in this country, and the future of transportation and america's national security with regards to energy. but i want to make sure that all of you know to please jump in. i don't want to ask a question and then ask another question. i want this to be a discussion,

and i'll steer it. everyone agree? do we all agree? wonderful. let me start first with fred. nice to see you again. >> good to see you. >> you've heard the findings of the report, the summary of the recommendations. we have heard about this new abundance, newfound or renewed abundance for energy in the united states and i've heard people this week -- the new buzzword last week and this week, saudi-america. we have all of this energy. fred, how do we harness it? how do we leverage it? and how do we not screw it up? >> well, i think it's important that you take the hyperbole of comments like america being the new saudi arabia of energy and put it in perspective. again, we're burning about 18.7 barrels of liquid fuels a day. we now produce, after an

incredible increase of domestic production, about 6.5 million barrels of oil per day. and when you take biofuels and the natural gas liquids, it's about 9 million barrels per day. so we are still importing an enormous amount of petroleum. so the first thing about our recommendation is to maximize u.s. oil and gas production everywhere, in alaska, offshore east coast, offshore west coast, gulf coast, in new york, in pennsylvania, in the eagle ford areas, and that has enormous implications in terms of, as i mentioned, balance of payments and g.d.p. growth, but

at the same time because of the enormity of the issue, you also have to continue to reduce demand by fuel efficiency standards and diversification of transportation. >> what role -- and i'm going to throw this to a c.e.o. in the crowd. so maybe david, you could take this. what role should the government play in the future of -- your business is transportation, too -- in the transportation business with this? look, we are mired in conversations about a fiscal cliff on the very right now. we're talking about long-term infrastructure build-out, a long-term energy plan. what role should c.e.o.'s have and the federal government have in making sure this gets done? >> this is the perfect opportunity for the federal government and for state governments to work together to achieve a common goal, right? there's plenty of times where, when we run a business, our interests might not coalesce with the interests of either of the parties.

as fred said, this is the opportunity that we have never had in this country before, where you can have consumer, the business and the governments all working together to take advantage of this huge resource, if you want to call it saudi america. from a waste management perspective, for us it makes so much sense, because it makes business sense. we get about $1.65 equivalent with natural gas and $4.10 diesel, so it makes great sense for our business. from a government point of view everybody today is talking about jobs and the fiscal cliff. our recommendations in the report create 1.7 million jobs. everyone talks about taxes and what's going to happen with the fiscal cliff. in the last 10 years there's been $1,500 for every american consumer has gone to increased oil prices. $1,500. we're now talking about $2,000 take the tax cuts make a different for middle-class

americans. you can get them that tax cut today if you invested in our report. and then everybody talks about entitlements. the social security administration trustees have said that high oil prices make the social security trust insolvent five years sooner than they would if you didn't have high oil prices. look, we all know what america needs. america needs jobs. america needs growth. following the recommendations in our report will lead to both of those. that's going to be good for the politicians, it's going to be good for the consumers, it's going to be good for american business. >> let me bring in the senators here to ask about -- i'll start with you, senator alexander. if you could just tell me a little bit about energy policy in this country and where it fits in in the conversations happening right now about the fiscal cliff. we're taking a great deal of soul-searching about america's priorities and taxes and spending, what we're going to spend money on, how we're going to tighten our belt. where does energy policy fit into this discussion?

>> the major place it fits is in the right policy, which would create an environment which would produce a lot more revenue, and that would help to reduce the debt. the federal government doesn't spend much money on energy. the energy research is about $6 billion a year, more or less. i'd like to see it doubled. i think if you're looking for something -- i mean, this report, i think, is a blueprint for independence. that doesn't mean we don't ever buy from people, this person or that person, but we're not in a position to be held hostage by anybody. it also focuses on finds more and use less, that's the magic formula. but i think what we can do in the federal government following up the last question with this one is, i think

invest in research, for example, and getting a 500-mile battery for electric cars, getting solar energy that's one kilowatt installed and finding a way to capture carbon from coal plants that can be turned into fuel that's commercially sold. i mean, we should look at the model of unconventional gas, and i'm sure we will in this discussion, in terms of how our unusual entrepreneurial system, our federal research and our system of private property have produced a situation where we have this massive advantage over europe and asia in terms of our -- in terms of our national natural gas. but it creates a better economy, high revenues that reduces the debt. >> senator, the same question to you. i'm wondering, this headline recently predicting that we're going to be -- the united states could be producing more

oil than saudi arabia beginning in 2020. i mean, this is something almost unimagined 10 years ago. what is the role of the federal government from here on out, given that? >> i think the role of the federal government is to do things that encourage exactly that result and to follow up a little bit on the question of fiscal cliff, part of the way that you saw this fiscal problem issue grow our relative position in the economy relative to everybody else's. one of our big problems right now is the percentage of government spending is way more than it should be relative to total g.d.p. and part of that is because you don't have the growth in g.d.p. that the right kind of energy policies would produce. if there's an easier formula ever in the history of economics than more american energy equals more american jobs, i don't know what it is, because it's not just the jobs to produce the energy, but it's all the jobs you have if you have this reliable supply of energy. i didn't have time to read it

this morning, but on the front page of the "wall street journal" it talks about there's a headline that indicates that there's obvious difficulty of connecting this cheap product we have in natural gas -- and you're cite, christine. 20 years ago we thought we were going to run out of natural gas as a country. connecting this cheap product with a more expensive market, getting it overseas. but that's good news for american manufacturers, it's good news for american utility bills. growing g.d.p. and also shifting our balance of payments. if we could get energy self-sufficient -- and that wouldn't mean you wouldn't buy on the world market, but if we essentially could meet our energy needs in the north american market, almost all of that money comes back to us. we have no better trading partner than canada, and nafta has dramatically increased the trading partner capacity of mexico. that's gone from somewhere in the 50 cent neighborhood or the

who 40's 20 years ago to the mid 70's now. they're quickly catching up with canada as a partner. when you buy energy in north america, they give you the money back. and that does a lot to solve our -- if you make your position in the overall economy better as a nation, suddenly your numbers begin to come back into the realm they need to be relative to the position of government vis-a-vis the rest of the economy. >> general, you told me earlier this is the most important issue facing america. tell me a little bit about that, why you think this is such an important issue. >> press the button first. transportation and the availability and the means to get there and what we do with it is without a question in my mind -- of course, being a marine and an infantry officer -- is without a doubt the most

important problem facing the united states. for several reasons. first, i do not believe that the american public truly understands the transportation problem and also the availability of the resources to solve that problem. i think we need an education program by learned scholars to help us getting this word out to america. i think that is essential, because it's coming on very, very fast. there are things that are happening we take for granted. as an example, we take for granted the fact that we can move thousands and thousands of marines and sailors and soldiers and their equipment overseas without any burden to our economy. not true. the truth of the matter is it's a tremendous burden to our economy to have a national security policy that defends the country that we love so much.

so i think without having the ability and the willingness to get out and give the american public forums such as this, and you're there to help us in giving the americans the answers to some of the very difficult and very cogent questions which they ask. i want to take this opportunity to thank robby for what he does . i met robby some years ago when he found my bottom office in an office building and came in, and we had a chat and i said, my goodness, this fellow knows what he's talking about. he has never disappointed me in any iota whatsoever. i think what we need to do, what we need to do is to explain to the american public things such as the fact that you cannot move thousands of troops and their equipment and

all of the other things that go with it, you cannot move free of charge. it has a price tag that is quite large, but it is in the best interest of our united states. so to answer your question, i think we need a very cogent energy policy that we can -- we, people in this room, people like you and me, that we can inform the american public that this is the problem and this is the way we propose to fix it. >> thank you. passionate about the subject, i can tell. [laughter] let's talk more about the military, because you talk about moving people and machinery. there's also -- let's bring in some of the other esteemed leaders of america's military here. what about american national interests in other parts of the world? how does that change, general conway? how does that change if we have this abundance of energy and

we're able to harness it in this country? >> it changes it. and i would say that my sense is that we're on a long drive as opposed to driving into darkness that we may have thought of 10 years ago, we're driving now into sunlight. but as fred pointed out, we still depend on foreign sources for about 40% of our energy requirement. it's going to be a long time mae even a central gravity. my mind that still creates a critical vulnerability, maybe even a central gravity. 2013 will be a very interesting year and it will be a long time before we are totally energy dependent.

to your question and, i think we need to be conscious of what decisions we can make as a nation. today, our economy as much more consideration on the part of great military minds than ever before. as we look to give it to the pacific for good and just reasons, we do so with full knowledge that we get our primary raw resource from the middle east, from africa, from the americas, and to a lesser degree, from europe. we need to be conscious of what the requirement is as we make military decisions. this vulnerability you we will phase, i believe we will for some time. we also have an economic competitor and a partner in china. they have a voracious appetite for natural resources and we're looking at new ways to get these in our own backyard, and maybe i will ask you this question, admiral. how important is the china factor in america energy program's going forward? >> i will talk to doubt, but i would like to mention a few puffs things about this report that may not have come out in your opening remarks. we definitely advocating opening of drilling in the united

states where we cannot, but there is a very strong part of this report that says it has to be done safely and we know how to do it safely. that is one contribution of those of us who have served in the armed forces, we do a lot of dangerous stuff in the armed forces, fuel, nuclear power, explosives. the way we do that safely is a high standards, rigid enforcement, and very professional inspectors to do it. we strongly recommend applying this model to regulatory body so that we can do this safely, so that we can do oil retractions safely. that we can do safely. the general and i live in pennsylvania and we want our water to be drinkable, our streams usable, but we believe firmly that can be done if you

enforce these standards. the second thing is that we do advocate a federal role and a non-pre-market to try to open up possibilities to this country for more different kinds of energy, but we are definitely concentrating on creating the conditions part of this. we are not talking about creating winners and losers in developed industries. we're talking about opening up to alternatives to today's petroleum based internal combustion engines so that we reduce our national security dependence on the oil that is coming from, in many cases, unstable countries and also regimes that do not wish us well, and quite the opposite. china and india are causing the trend that will drive the cost of petroleum up, so no matter what we do, the balance of payments is worse, so from the economic point of view, it is

china's role as they seek to achieve wealth and prosperity, which they want and which we want them to have that causes us to look elsewhere for these alternatives so that we are not hurt by their success but we have alternatives for ourselves. >> can i have you weigh in on the importance for how these new trends in energy production may change where we are acting in what we're doing in the rest of the world?

>> there is a lot of talk about if this will change our focus in the middle east, but countries that are self- sufficient still pay the same market price than the world market, so that will not change. i think we will still have an interest in the middle east and we will still have some emphasis there but it gives us more leverage, better options. it improves our flexibility, of this rebalancing of our national security policies in the pacific, an area where we need to pay closer attention that i hope can be done in a constructive way of as we develop our relationship with china. i think it gives us more flexibility, leverage, options

and it hopes with resilience. overall, the foundation of military power, no matter how great and good we are, the bedrock, the thing we build our national security leverage on is a well functioning economy. we need to show the world we can get our economy under control, reduce the deficit, and begin to show leadership in various areas of new technology that demonstrated here to the rest of the world. kohl will always be there. there's lots of work there. all the sales will help, i think, of leverage our capability and give us more options. >> let me bring you in. 92% of american transportation is run on petroleum. with this new landscape for energy production of, how are we doing on diversifying different kinds of things that are running our transportation? >> so far, it is going slow.

something that was deeply focused on was something note senator alexander said earlier. we need to find more and use less. i think you're asking about the use less part. the extension of the changing fuel efficiency standards was one thing, but we believe fervently in the need to diversify away from using petroleum for transportation and given that it represents 70% of our use of petroleum to begin with. with the change in technology and the access to so much homegrown natural gas, we can use that and we can also use the development of electricity and its usability in automobiles and light trucks. >> what about the role of the government?

find more coming years last, and someone has to make sure we are not doing dangerous things, as the admiral pointed out. >> i am a private sector guy, and i believe in the application of private and free markets for the development of our country, but there are times it is clear when the government has an unfortunate role to play. in fred's introductory comments, the argument was very clear. the market for oil, on which we depend, is not a free market. the only way we can respond to that is an activist approach. that does not mean it has to be very expensive, but we need to develop a coherent policy. the fact that are recommended proposals are supported by people typically on the right side of the dial and others are typically supported by the left

should suggest to you that this is not an ideological game. this is about trying to come up with a set of proposals that are good for our country overall. the lack of ideological support should be viewed as a positive. >> ways to see you. >> thanks. i apologize for the fact that i do not control my life for scheduled to much. >> nothing going on in your world. now that we have brought you from the edge of the fiscal cliff, let's talk about these for a moment. you have seen the headlines that say, saudi america. we have this new found richness, new technologies to find energy. i have seen some estimates up to

3 million new jobs directly related to the energy boom. is it real? how unfortunate of a driver will that be for the economy? when you're sitting down trying to figure out what growth will look like in this country, how does a factor in? >> in a few ways. number one, if there's one thing i feel more optimistic than i did one decade ago, i had a book out around 2006 and i felt like, when you are out making the case for why there should be more location as opposed to china and india, you felt like you how the wind in your face. you have great meetings but then they pull your side and say, that's a powerful argument, but we're moving this to bangalor next week. there is much more of an economic case for people to be relocating and bring jobs back. some of that is about the way it is structured between us and china and some of it is energy. no doubt the future of natural gas is just making the price

calculation more attractive to someone thinking about a new location and, in a planned of being in the united states. energy, the lower cost a promised natural-gas is a promised economic factor in location decisions making it more competitive. that point was driven less by democrats and republicans and really the consulting community making this case to their clients and that is now getting out. i think that is one thing. secondly, as we have seen, and others would say, we are not dependent on foreign oil as much as the global oil markets. when oil markets are volatile, it brings in volatility to our economy.

we felt it both in 2011 and an 2012. buchanan prevented, but to have the volatility have such an impact, we were fortunate. we put in a payroll tax cut that would cushion people's consumer spending a bit, but when you are in a tenuous time, as we has been the, the fact that the volatility can have such an effect on consumer confidence, we all know that americans are over affected by consumer confidence factors. they are bothered by sudden spikes in gasoline prices more than economics tell you that they should be. and, obviously, jobs related to the actual increase in oil and natural gas production and have an industry is based off of alternative fuels, a think that is all very productive. one thing i want to say since we are in this time where no one seems to be getting along is

that, one place where i see a real bipartisan agreement, they have an excellent bill on electric vehicles where they have an idea that maybe you have already talked about, but i believe so much in that type of thing. to be able to show something working somewhere from the first time 60 minutes or cnn and is able to do a story where you show a community where it is easy and the incentives are there two years on alternative vehicle, i know what will happen. every mayor will see that, really the people come and say, why cannot we do this? having this deployment community proposal that senator blogged and alexander have as, i think, the type of thing you have to do to create momentum.

you have to show success and usability. you look at that in the 54.5% goal by 2025 in there, and i think that creates real momentum. all of these things are good for certainty, good for bringing jobs back, and creating economic activity as this becomes the place to not only explore and their research on but the ploy alternative vehicles and alternative vehicle technology. >> i will seize on that with the bipartisanship because we will not smell that in the next three weeks. let's talk about the deployment idea. >> the idea is for the government to help create models to see what works and how it can work. i think he said it very well. you have the story about how this community is responding to this infrastructure that makes it easier to have an electric

car or natural gas-powered car and you see what happens. senator brown alexander has been a real leader in this and he even has an electric car. he is going the distance here, walking the walk. that's the kind of thing government can do. government can do a lot on the regulatory side to slow things down if you forget to have effective cost-benefit analysis, but it can do a lot on the project side to really find something that works and the community becomes the laboratory for change and that others can then model. you do not have to do it everywhere and if you can show in water to a location that

there really work. that is the driving force behind the idea of that lamar has been a significant spokesperson for. >> do like that car? >> i do like it. i have driven my leaf. i live in this building in a plug in the wall when i go home at night. that's all i have to do. deployment communities are a good idea. sometimes the government can have a demonstration project that makes a difference. they did a hydraulic factory and we have had fracking are around forever. three things made a difference in it. one was a huge to demonstrate that you could do it in a big way which was helpful. the second was the laboratory inventing 3d mapping.

it was the entrepreneurs and the people who was the land that made the difference. iolite the deployment communities, but i prefer research and development. i take the $14 billion and we would spend on windmills and put it on energy research. that's a mature technology, but if you want to sell a lot of those lef's the key is to get the cost from $30,000 down to $20,000 and the key would be a 500,000 mile battery. this little agency in the department of energy has a research project that they are funding which is a double the density of lithium batteries for cars. that's exactly where we ought to go. they would also have a project

to turn a microbe into commercial fuel. thethat would work, that's holy grail of energy. it is also working on solar power and $1 per kilowatt installed. that's precisely what we should do and does not cost much in federal money. we spend $6 billion per year on energy research. we could double that over five years on those kinds of projects and i think you would be the most voluble thing we could do which is perfectly consistent with many of the recommendations in this report. >> we will take some questions from the audience, but i wanted to make sure everyone got a chance to weigh in on what you think the role government should be. companies, governments, and citizens in trying to figure out a national problem. >> hello, thank you.

the government needs to recognize that for us to be economically competitive, we need a reliable and economic source of energy. the four alternatives are available, which are economic and reliable, we have to make sure the resources are economical. yes, we can increase the oil production and, but if we maintain a free market, the prices will depend on global pricing. one more point i would like to make regarding conventional energy, the history of the internal combustion engine, we are spending a 15% less and there is a huge amount of improvement that is possible. of that improvement happens, which i'm confident that it will, it will attack the problem at the root, where we're using a lot less oil and creating less carbon dioxide.

the federal government recognizes that the internal combustion engine is going to power in the near future or the medium future, the alternatives will be ready for prime time and that would be helpful economically house well. >> whenever time of transition we make in how we power the country or powered transportation, it's going to take a long time. there's no reason for that to be painful if we can bridge that -- but how long it will take people to replace the vehicles they have now, whether new camry for that replacement or not and what you can do, but just realistic understanding that if we knew what was going replace the internal combustion engine for transportation and, it will

be decades before every family in america got there and that is probably the right way to do it. understanding that and reliable, dependable -- something you know will be there, it allows your economy to grow in unbelievable ways. we have a potential here to really launch our economy in a way that not only helps us but helps the whole world who will anchor around a strong and growing u.s. economy and they all know it. there is no country in the world for the people in charge do not understand that they benefit from a strong, dependable, secure u.s. economy and energy is the key, i think. >> christine, can i just say something here?

i think one program we have done in securing american pricing energy and is something of note that many of us have seen. i think it speaks to several key messages. just as we did in 2005, they're just as relevant today when we were importing 60% vs. 40% and continuing to go down. they also fall along what senator blunt said house well. but you see from when we have the oil crisis, there is no such thing as energy independence. some fear we define the problem as energy independence and it is all about imported oil. but then we solve a problem. we have been saying we needed to end our dependence on foreign oil, but the truth is we have a

dependence on oil and any thing that happens anywhere in the world affects us here. if we miss diagnose the problem, we come up with the wrong solution. at the time, in a lot of sense. it's catchy. the public understands, but i think we need educating continue talking about this with the american public. if you missed diagnosed the problem, you have the wrong solution. the problem is one of energy security and resiliency. the second thing you learn in that simulation every time the cabinet runs through it is it never fails, they always turn around to me on the panel proper words and they say, i wish the hon done this 10 years ago. that is what senator blunt was saying. there are no good short-term solutions but there are really go long-term solutions but you have have the policy in place in order to have them matter.

that is why when we put together the strategy, we continue to talk about producing more coming using it more efficiently so our economy is more insulated from the shock as well as finding alternatives so that we are not completely hostage to this global market and that cartel. the unique the policies in place today in order to have that in time, is this a bipartisan consensus to have policies implemented today so that over the next five, 10, 15, 20 years we continue to use this abundance of energy and thus less of the time we have been given to put us in the right position and. >> i do not know who wants to field this, but in this white paper, you cite that hydraulic fracking 5 should be regulated at the state level. can we talk about this? environmentalists and consumer groups talk about the growth of fracking. are the state able to do this?

should they do this? >> i think the answer is absolutely, yes. there are some states that have really good and tight regulations. the most important thing we have to make sure that the american public continues to support the idea because we need this energy out of the ground. if there is a problem more some accidents and the country turns to side against it, that would be the worst outcome. we need to make sure there is a smart regulatory approach that does not withhold. we should be producing as much as we can when we can, but the roles of the road should be set.

there are states that have very smart regulatory approaches and there are some just getting into this business and are starting to think through these questions. we are advocating that states understand the resources better and they have the right agencies to do this. but just make sure that the best practices are shared with others and implemented. >> as a former governor, i always bristled a bit at the suggestion that somehow i was smarter today when i got up and flew up here just because i am in washington, d.c. i don't believe that. of course states can and should do it because some states may have a different attitude towards this in pennsylvania than texas. so you want to take into account many of these issues that are environmental issues and reassuring people locally about whether the procedures being

used are safe and reliable. often local people can do a better job of explaining that or they may not want as much of it. they may want less. i thinks states have a right to be wrong in terms of competence. i just went through a hearing the other day on this meningitis outbreak that we had where people were taking these bad injections with unsterile stuff produced by a massachusetts compound and factory and it was the tennessee department of health that found out and they saved lives. the fda was not looking too good. but yes is the answer to the question. the epa and the federal government have delegated a lot of the responsibilities for clean air and water to the states. they can have an overview for that, but i like the idea of states doing it. >> get ready for some questions. i'm going to put you on the spot, just among friends here. are we going to go over the fiscal cliff? [laughter] >> this is off the record? >> just us.

>> there is no reason the country should not be able to come together and overcome the dysfunction to have a broad, fair agreement revenues from those who can afford it most and the type of entitlement reform that we need to gather to be part of a balanced deficit reduction package. everyone has to realize compromise is not a dirty word. there's just no reason. they're the reason it should come to that. i will connect a slightly to our discussion here in two points. one reason you want to have an agreement that does include the type of significant revenues and mandatory savings is that because we cannot come to an agreement on that, we continue to cut too deeply into some of the domestic discretionary where a lot of our investment in

the future comes from. i agree completely with what senator alexander said about the and portents -- about the importance of our andy in breakthrough technologies -- of research and development that would not get funded simply because no individual actor can capture the benefits of the research enough to justify meaning that we, as a country, are under investing and that is really important in our country. because we cannot come up with a big agreement and we keep cutting deeper and deeper into domestic discretionary spending, it just means not only in this area, and i age from other areas, but our ability to invest in research and the future is lessened and we are all poorer for it.

>> i will make dinner reservations for new year's eve. you're telling me i will not be working. there is a hope we're going to avert this thing? where are the microphones? there's one right over there. >> i'm wondering the phrase "smart grid" does not appear in the report today. how does this fit into the council's thinking? >> safe and the energy security leadership council has a long history of many policies. just because we do not mention

it in this policy does not mean we have not said it before and that we continue to support it. what i say about these margaret, and i will tie this to the electric vehicle, for a long time, we believe the electrification of transportation is probably the best way to drive the smart grid. politically because it deals with the question of oil so acutely. republicans and democrats can get together. when people put an electric car in their rush hours. suddenly their relationship to electricity prices means so much to them. during your dishes at 7:00 at night vs 10:30 at night and

saving a few pennies will probably know not drive the american consumer to embrace and understand electricity in ways that have never done before, but putting a car in their garage, the idea is to spend a little bit capital upfront but you have a lower operating costs because electricity is so cheap. you put these in these deployments communities, and we believe that would be research and development, the petrie dishes of learning about consumers. as you put them in those garages, those are the communities that will be the fastest to upgrade the grids and make sure these margaret is a robust capability in their community. >> over your arm the left. >> i want to congratulate you all. i am with the naval postgraduate school, but i ended up creating something we call the energy

consensus for one-year to ask people to talk about energy when it was a forbidden topic in the defense department. this was through 2004. i got funding from the department of defense and it created the energy conversation. i want to get to a point that was brought up in number of times, having the american public understand this unbelievably complex story. i recommend you all watch alan alda's vido, "the flame." he asked what it was money was small and could not get an answer. he went up was done every university and they put on a worldwide contest to explain what a flame is to 11 year-old. they had 600 submissions and 6011 year old evaluated this. keep in mind how complex that is. i bought a book two weeks ago called "black gold" for my granddaughter by albert marin. i recommend of the academics in

this room or anywhere. not many people are going to read or understand your report. a lot of what needs doing telling this story as that it has to be visual because it is so unbelievably complicated, interdependence, integrated, and for most of us, it just looks like chaos. i'm going to suggest that you do things like kids were studying english working with those studying energy and that their work as a collaborative effort to write understandable stories

on these various elements of energy. the other thing i would suggest is that if the federal government, whenever they do any contract and, i had already asked belair to do this, but any contract not classified has to have a one-page list of bullets that are what i call new learnings. i'm sorry i went on for so long, but i have worked on this for so long. >> thank you. >> i do like the idea of those bullet points. they're doing that for mortgages now. back here. >> . arm from national defense

university. i agree with your conclusions that the energy outlook is much more positive than two years ago, but, if i may, i want to question two functions, one of them, the difference between boulder ability and [inaudible] what happens in china and india will affect the united states. we will never be independent in a global market. many of you talked about countries that do not wish us well. basically, opec countries. these countries, in my opinion,

have been very cooperative. libya, kuwait, uae. they have all helped us contained iran. they have some connection with an 9/11. our relationship with these countries have been very good. >> i think it has been said what you said in your first point. the fact that we may reduce the amount of oil we import, it does not decouple was from the world oil market. canada and norway are both exporters, but their citizens pay of the market price for a gallon of gasoline. we said exactly what you said on your first point. on your second point, the opec nations in being friends of the united states, i think the answer to that is that both sides have had a relationship that has been economically

necessary, but i do not think the opec cartel conducts its affairs in a way to benefit the united states of america. they conduct their affairs so that they do not kill the goose that laid the golden egg. if you turn into the record on pages 8 and 9, you're asking for some visual clues as to what's going on here. if you look on page 8 coming will see the united states is paying about $20 million per month to import petroleum. you see the sharp rise in the line just before 2008 and then

it sort of flat lines from 2008 going through the significant dip that was represented by the subprime mortgage meltdown. what's interesting about it is from that point forward it has remained about 50% of the balance of payments and deficits. that is because the oil cartel prices the marginal barrel of oil as what it costs to get it out of the ground and what the maximum is that they cannot pay without tipping the consumers over into a recession. the chart on the next page to the right of that shows it even more clearly. as you can see, the blue lines there, right before 2008, the meltdown, we went up to $147 per barrel for oil.

that was the match that let off the subprimal down because the subprime borrowers, who probably should not have bought that house to begin with and maybe you were taken advantage of were literally reduced to making the decision not between buying gasoline to go to work for defaulting on the mortgage. you see a precipitous drop in the dark blue and here it goes back up. we are now at over 6% of our gdp spend of petroleum. as mr. sperling said, they reduce to the payroll tax last year, in 2011, amounting to $108 billion. it's not by accident of the price of fuel went up and consumed our disposable income in this country. as you can see, the light blue

bar, the only way to solve this problem is not to get divorced from the global economy, as canada and norway has showed some it would not make a difference anyway. we need to diversify transportation so that it is not as dependent upon petroleum as is currently the case and this redline on page 9, probably the most important of all, the amount of oil that we can assume per $1,000 of g.d.p. if we can diversify into compressed natural gas and come up with a viable electrification and of trucks and vehicles, those are profound developments which were not possible until very recently. the report that we have here house all three of those things, the maximization of oil. it into saudi arabia levels mean we produce 11 million barrels. at the same time, driving down

consumption and, fuel efficiency standards, electrification, natural gas, and continuing research and development that sutterville is and was talking about in the hopes we could take a biofuels to fly in airplanes and drive trucks to get them into scaled production that would be cost-effective. if we do all three of those things, we have a real opportunity to change the economic dependency of this country and certainly the national security risks that we continue to have with a black swan events like saudi arabia becoming a state that is controlled like a theocracy like iran or something.

>> let's get one more here. >> i'm curious what mr. smith thinks about the conversation between senator alexander and gene sperling about research and development. the price of plasma televisions fell 20 full and it really was not a matter of research and development does it was staley on deployment. how much do we have to focus on new technology, getting into scale land to a point where they are produced in volumes such as prices can decline and be accessible to more consumers and create a virtuous cycle but there has to be a balance and a curious where you come down on that. >> we live normal fruits of research and development that

has been conducted in years past, some by the government, in terms of their plans come a jet engines, the internet, so forth some of it was done in private research and development laboratories, like bell labs. the japanese industry and the japanese government has been very active in this area. i would say to you the global revolution creating the improvements in lithium ion batteries which was helped at mit so this is just one big world of intellectual property and that has led nissan leafs to be built in tennessee. the electrical power grid that was mentioned would provide the power. let me give you a "gee whiz"

statistic. there are too ordered 50 million light duty cars and trucks in the united states and we have enough power-generating capability that if you could wave a magic and have a smart grid and all those vehicles were converted to electric power, which converts into energy at a rate of over 85% vs. less than 20% for an internal combustion engine and, you would not have to build another power plants in the united states of america. with the natural gas revolution that is under way, we have a plentiful supply for electricity to move a significant amount of the 10 million barrels of oil

per day we consume in light duty trucks and vehicles and to hybrid or hybrid-electric power and reduce our consumption overall by millions of barrels of oil per day thereby reducing the amount that the economy expounds on petroleum per unit of gdp. that's the goal here. >> you have to have a cheaper battery. we're not going to sell a lot as long as the batteries are so expensive. >> i think the research and development, senator, is absolutely essential on batteries and biofuel-scale production. those two areas are the most important, but i have to tell you krupa an incredible piece of machinery is the chevy volt. it will produce 35 miles of transportation on electric power and then you have a range of 350 miles an days sell about 3000 of them per day -- excuse me, per month. i know my friend would like to be selling 3000 per day.

i think improved battery technology is on the trajectory and that is the holy grail, pier electric. i think a lot of progress is being made here, but the recommendations we have here have the best chance of achieving a kind of breakthrough. >> it's a great point that there are a lot of different types of fuel. ireland ceo of a garbage company and we take the waste to produce every day and one company produces eight times the amount of power from waste than the entire solar industry. there's no company investing -- and we get about 50-60 of the btu content. there's no company introducing more on how to get 100% than ours. you have a lot of technologies

that absolutely working on that you have to build these plans to scale. who will take that kind of risk? it's a great point that if we're going to help in new technologies, it is not just about research, development. we have plenty, but now we have to risk $100 million to see if it works to scale. no matter which way you go, we happen to be going compressed natural gas, but where do you fuel these trucks? building that infrastructure this year, we will spend about $50 million on building our own cng plants. most of those we will make available to the public so taxicabs and buses can fuel there, but that is another place we could use help. how do we build the data structure when we move to these

fleets that we can have an infrastructure to support those leads? we happen to be doing it on our own. it does not make a lot of economic sense in a lot of areas, but where we can get our own feeling station, that's an area where we could use help building an infrastructure to make it more economic. i think your point is absolutely well taken. there's plenty of technologies out there, and we do not know if they will scale. that is where we could use help, defraying the initial build out risk. >> i did the very important to understand, and the heavy- vehicle side, a mention 10 million barrels per day consumed by light-duty vehicles and 300 million are consumed by the over the road trucks, buses, garbage vehicles. the over the road sector today is paying close to $4 per gallon for diesel fuel.

the natural gas equivalents is under $2 per gallon, so there is a huge economic incentive. until recently, there were not engines that could efficiently use lng, cummins and others. infrastructure is being put in by shell and ta, the second- largest truck stop system, and by clean energy, mr. pickens company and pilot and flying j. there are a lot of things in this area that are moving in terms of heavy-duty vehicles in terms of natural gas and light duty vehicles are moving towards electrification and hybrids. >> our biggest problem with the natural gas in the structured are people with a gasoline- powered engines to ask if they can buy our gas for $1.99 and we have to tell them that it's a different kind of gas. >> on that note, i think we will leave it there. a big round of applause for everyone on the panel.

thank you so much for spending time with us this morning. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2012] >> in a few moments president obama marks 20 years. in about 20 minutes we will look at bill loopholes and deductions that could be part of the negotiations over the fiscal cliff. then a forum on energy security. several live events to tell you about on our companion network, c-span 3.

the response to hurricane sandy at 10:00 a.m. eastern. at 3:00 p.m. the coalition for fiscal and national security looks at how national security is affected by the deficit. speakers include mike mullen and the former chair of the armed services committee. later, the subject for strategic and international studies hosts of forum on the u.s. relationship with china. that is at 5:30 p.m. eastern. >> we are at the new york state museum. this is art gallery dedicated to the history of this september 11 attacks on the world trade center.

it is a gallery to tell the story about the first moments of the attack using objects and photographs from the world trade center site. we put this in a place where the public can touch it. it gives a tangible experience. this is a piece of steel from the north tower. this is a dramatically damaged piece of steel. you can see the opening scene where the windows would have been. this metal strip on the front of the building. every piece marks which side of the building it is on, so we

research that. it actually has shocked numbers -- chalk numbers. it also has numbers on the field that correspond to that. >> we look behind the scenes at the history of albany, and sunday at 5:00 p.m. on american tv.tory t >> president obama is warning the syrian president assad that there would be consequences if he were to use chemical weapons on his own people. this marks 20 years since russia and the u.s. agreed to secure weapons in the former soviet state. leon panetta introduces the

president at this event. >> thank you. [applause] midafternoon. senators, distinguished guests, ambassadors and officials, thank you all for being here today. i am honored to be able to participate in this symposium marking the 20th anniversary. let me thank the university for their great work in organizing today's conference.

it has been a day to reflect on the successes that have been achieved in non-proliferation over the past two decades through the program, and it has been a particular honor to be when the company of senators whose leadership has made this possible. we can stay the course of history change for the better because these men helped the nation confronts the threat of nuclear proliferation at the end of the cold war. the world would have been a far more dangerous and threatening place were it not for these patriots. earlier this afternoon i was honored to be able to present the distinguished public service award, the highest civilian

honor. he has made the world safer and more secure. you have a profound gratitude for the nation and global community. i want to thank my deputy, who played a critical role in working with the senators on their legislation, established a program in the early 1990's as an assistant secretary of defense, and continues that effort in the pentagon. it is also important that we use this to generate new thinking and new ideas for how best to carry this vital vision into the future. it is important to have this discussion because the program is at a critical inflection point. it has evolved from a focus on infrastructure in the soviet

union to encompass a broader range across asia and africa and the middle east, and despite the success achieved in the former soviet union, this program remains as critical as ever and maintains a strong support of leadership. it also has the strong support of our special guest today. we are honored to serve in his cabinet and honored to introduce. president obama has been a leader in reducing the threat of weapons of mass destruction. he has been a leader since he joined the united states senate and partner closely with senator dick lugar. as president, he has set a visionary agenda and to achieve a world without nuclear weapons and has taken practical steps to move the world in that

direction. he has helped renew america's global leadership, and he has helped advance the cause of peace and security in the 21st century. it is my honor to introduce our commander in chief, president barack obama. [applause] ♪ >> thank you very much. thank you so much. good afternoon everybody. it is wonderful to be back. thank you for the introduction.

last week at the right house, we had our first meeting since the election. it was a chance for me to banks -- thank my entire team for their service for keeping the country safe and strong. few have done more than you in that regard. that includes taking care of our remarkable men and women in uniform and their families. keeping our military the best in the world bar none. thank you for being such an outstanding secretary of defense. [applause] i am not here to give a big speech. i wanted to come by and join you in marking the 20th anniversary of one of the country's smartest and most successful national security programs.

people in this room conceived it and build it. i want to a knowledge a leader who now helps guide the secretary of defense. thank you for your great work. [applause] you have to think about what real visionaries do. you look at the world and see what is missing. they set out to fill the gap. to build something new. to imagine after decades of

confrontation how our nations might engage in cooperation. early in the cold war, einstein warned of the danger of our wisdom not keeping pace with our technology. our wisdom began to catch up. i want to be here because my own personal debt to these two leaders. when i was elected to the senate, one of the first leaders i called had an extraordinary reputation for his work on a whole range of issues in the senate. thank you for taking my call. [laughter] we do small talk. he congratulates me on being elected. he says, i have two pieces of advice. the first, get a seat on the

foreign relations committee. i did that. the second, learn from dick. i did that, too. i took his advice then and as president, i continue to value his vice -- advice. sam is one of the four-horseman, a pretty honest nickname. he has spoken out for a world without nuclear weapons. with your nuclear threat initiative, you help us ratified a new treaty, rally the world to secure nuclear materials, strengthen the regime and create an international fuel bank for peaceful, nuclear power. that is an extraordinary legacy. thank you for your partnership and leadership. [applause]

because i took his advice, i came to know and admire dick. i was a junior senator but he was willing to take me in and on the issues we are celebrating today, took me in as a pupil. i watched and learned and when we worked together to pass a law to speed up the lockdown of nuclear materials, it was called lugor-obama, in that order. [laughter] i want to take this opportunity to say something else. one thing we have shared is the notion of what public service should be. it ought to be more than just doing what is popular at the moment. it is about doing what is right over the long term, problem

solving, governance, and not just how we can score political points on each other or engage in obstructionism. where copper not rigid compromise is not a vice. -- where compromise is not a bikes. -- vice. that is the bipartisan tradition we need more of in washington, especially on foreign policy. as you prepare to leave the senate you love, i think i speak on behalf of everybody here and millions of people across the country when i say your legacy will endure in a safer and more secure world and a safer and more secure america. we pray this nation produces more leaders with your sense of decency and stability and integrity. we are grateful to you.

thank you very much. [applause] i will point out it was the coup took me on my first foreign trip as a senator to russia, ukraine, and we were there to see the cooperative production program in action. the first thing i learned is when dick travels overseas, it is not a duncan. -- junkin. we did not stop and look at beautiful sights and lounge around. he wore out every 25-year-old staffoer.

what you also learn is dick -- the more remote a place is, the more obscure the facility is, the bigger a rock star dick is. [laughter] they love him. i remember walking through one facility. i leaned in for a closer look. they said, do not touch that orange stuff. at an ever played -- at another point, i am thinking, why do we not have masks on? this is the kind of trip you take with dick. [laughter] land mines, technicians showing off test to spirit you ask, what is that? anthrax, a plague.

should you not keep it in something more sturdy than this. dick is standing in the back of the room. [laughter] i asked to give he has seen it. -- i asked him if he has seen it. he says, i do not get close to it now. visiting those facilities seeing the work so many of you do, seeing these weapons once aimed at us now being turned into scrap, surely brought home how important this work was. this is one of our most important national security programs. it is the important example of the kinds of partnerships we need. working together to meet challenges no nation could address on a song. it is a foundation for the vision i laid out. nations come together to secure nuclear materials.

we build on and continue to work to reduce arsenals. we strengthen the nuclear -- over time, we come closer to our ultimate vision. a world without nuclear weapons. that is why we have not just sustain programs for the past four years. we have worked with all of you to strengthen. expansion in it, -- expanding it to 80 nations. partnering with others, companies from africa, to prevent the spread iof diseases. i have to give a shout out to someone on the original team. he has been working ever since. we are very proud of her. [applause]

we worked to keep weapons from spreading, whether it was nuclear materials in libya and arenor now. we will continue to support the legitimate aspirations of the syrian people, engaging with the opposition, providing them with humanitarian aid, and working for a transition to a syria that is free of the regime. today, i want to make it absolutely clear to assad the world is watching. the use of chemical weapons is an would be totally unacceptable. if you make the tragic mistake of using these weapons, there will be consequences and you will be held accountable. [applause]

we simply cannot allow the 26 -- the 21st century to the darkened by the weapons of the 20th century. over the last four years, we make critical investments in our production programs. energy, state, and we have been increasing funding and sustaining it. even as we make some very tough fiscal choices, we will keep investing in these programs. our national security depends on it. after all, even with all of your success, the thousands of missiles destroyed, bombers and submarines eliminated, the warheads deactivated, we are nowhere near done. by a long shot. you all know this. there is still much too much material. being stored without enough protection. there are still terrorists and criminal gangs doing everything they can to get their hands on them.

if they get it, they will use it. killing hundreds of thousands of innocent people. that is why i continue to believe nuclear terrorism remains one of the greatest threats to global security. working to prevent nuclear terrorism will remain one of my top priorities. i came here in part to say we cannot let our guard down. there needs to be a sustained effort across all of your organizations across our government. we have to keep investing in our people and in new technologies. we are joined by some of our russian friends today. russia said our current agreement has not kept pace. let's update it. let's work with russia as an equal partner. let's continue to work.

i am optimistic we can carr. we have to create new targets. i know you are committed to this. i want you to know that i am, too. let me leave you with a story of the first trip dick and i took together. you may remember the spirit i was in the ukraine. we went to a facility. we walked down these long, dark corridors. we are talking our heads. stepping over puddles of something. we were not sure what it was. [laughter] we came across women sitting at a work table with a pile of old artillery. women were sitting there, taking them apart. by hand. slowly, carefully, one by one. it took decades.

to build those arsenals. it will take decades and continued investments to dispel them. the two -- dismantle them. the tee -- the two of you know this. i want everybody who is participating in this to know that the work you do is absolutely vital to our national security and global security. missile by missile, were ahead by warhead, shell by shell, we are putting an era behind us. we are moving closer to the future we seek. a future where these weapons never threaten that children again. a future where we know the security and peace of a world without nuclear weapons. i could not be prouder of the settlement. i am proud to call them friends. i look forward to continue to work forward with them and all of you in the years to come. thank you very much. [applause]

["hail to the chief" playing --

♪ ♪

["the stars and stripes forever" playing] >> this weekend and on american history tv, follow harry truman 's grandson. >> everybody has their own view

of what happened. i do not want to argue about the history. we are past that. honor the dead, listen to the living, and do what i can to make sure this does not happen again. >> we will joint -- we will be joined in washington. >> more about the tax loopholes and deductions that could be involved in negotiations over the fiscal cliff. this is 50 minutes.

host: we turn our attention to deductions and tax loopholes. some are potentially on the chopping block. joining us is john mckinnon from "the wall street journal." what are loopholes and deductions? guest: loopholes or tax breaks of all different sorts. whether you like a loophole depends where you sit. deductions are the ones most people are most familiar with. the big itemized deductions are the home mortgage interest deduction. the deduction for charitable contributions is important. there are all kinds of other breaks. there are some that are big that people may not be aware of.

the health care that we get a work represents a big source of income to a lot of people. it doesn't count as income on your taxes. that is a giant break in itself and known as an exemption. there are other breaks that exist. the earned income tax credit goes to the working poor. then folks with children get a child credit that is a lucrative credit, worth $1,000 per child right now. congress loves tax breaks. host: is there a difference between a deduction and tax credits? guest: a deduction is something you take off your income. a credit is something that is taken away from the tax that you owe. if you owe $20,000 in tax and get $1,000 tax credit, you're

down to $19,000. host: is loopholes a term that congress likes? guest: they are talking about things they would like to get rid of or scale back. tax breaks are a little bit more neutral. host: are there any sacred cows in deductions? guest: definitely. almost every tax break has a constituency. when congress starts to think about getting rid of some of these things, the constituencies, out of the woodwork. a classic example is the home mortgage interest deduction. there is real estate in every congressional -- you'll hear from a lot of people about it. host: it cost the government about $100 billion. who benefits? guest: realtors, home builders. host: is the average american seeing a benefit? guest: everyone with enough wealth to be able to buy a home will benefit from this break. in terms of the percentages, people in the middle class and upper middle class benefit the most from this. there are limits on your ability

to deduct home mortgage interest if you are extremely wealthy. rich folks do not benefit as much as folks in the middle class. something that benefits just about everybody who pays the taxes. it is beneficial for people in the high tax states. they tend to be on the east and west coasts and in more affluent states. they tend to be blue states, as well. host: charitable contributions. who uses that? guest: that tends to benefit a broad range of people.

it is surprising how people at the lower and giveaway. wealthy people donate allied. mitt romney gave away millions and millions of dollars. host: things like capital gains dividends and other things that benefit wealthier in comes? guest: the caplet gains and dividends is the classic break that benefits the wealthy. they think it is correct if they receive more than 90% of the benefit.

people and the middle class get a little benefit from that break. the majority of the break goes to the wealthy. host: there is a recent story from politico. host: how significant of these deductions? guest: they can be important. the goal is to not get rid of the budget deficit. lots of people do not want to get rid of the budget deficit. they want to get it down to a manageable level. opinions differ. you can make a big dent through closing or reducing the loopholes.

host: do you expect them to play a role? could they end up on the chopping block? guest: republicans have put them on the table. i think you probably will see some of both.

this is a process that will go on for the better part of the next year. during that process, you will see some of both. host: john mckinnon is a reporter for "the wall street journal." here are the numbers to call. republicans, 202-585-3881. democrats, 202-585-3880. independent callers, 202-585- 3882.

host: we continue our low-cost at taxables and deductions. curtis dubay is, from the heritage of foundation and charles marra is from the center for budget and policy board reported. thanks to both of you for being here this morning. curtis dubay, how important our deductions? guest: we're so focused on how we can avoid raising taxes that we are losing the fourth for the trees. we are nearing a debt crisis. it is in the very near future and is driven by too much spending. we should be focusing on how to get spending under control we do not have a revenue problem. we have a spending problem. we should be focused on what really matters, what is driving the debt crisis. keep in mind, the debt crisis means that the economy

collapses, more people are out of work. it means that we do not have money to pay for basic benefits like medicare and social security. it is important to talk about deductions and tax policy in terms of tax reform. john boehner opened the door for that. president obama has indicated no intention of looking at that. host: what deductions would you put on the table? guest: tax reform is not to raise revenue. is to make the tax code less of a drag on the economy. we do that by lowering tax rates and getting rid of some deductions, exemptions, credits. but we do not do it to raise revenue. host: chuck marra, how important our deductions?

guest: they are very important. if you get into this notion that they are loopholes, then you look at the very popular deductions the people rely on. they're trying to balance the economic weakness with the long-term needs of the economy, which is that we do face a future of deficits that are unsustainable. we are trying to stabilize the debt has a share of our economy over time. that means about $4 trillion in savings. the good news is, last year, the congress and the president got together and locked in about $4 trillion of spending cuts. it has to be enacted. we're talking about 40% of the spending budget. that includes the defense budget, and other non-defense

spending. all of that spending will be squeezed over 10 years by 15%. that locks in $1.5 trillion and we have another $2.5 trillion to go. the president is saying, let's let the middle class go forward to support the economy, but let's take the high end of tax cuts and let them sunset. we will generate $1 trillion at one trillion dollars, you have to and a half trillion dollars. you have a trillion and a half to go, and that is where tax deductions come in. then you are going to look at tax deductions versus other spending. the main thing that has not been

cut is medicaid and social security. it is important to get savings out of the deductions because medicaid can only take such i hit. if you like to join the conversation, here are the numbers to call. republicans can call -- let's take a look at some of the deductions that are in the tax code. the mortgage rate deduction is nearly $100 billion. that is a homage because when americans take that deduction on their mortgage. also state and local income taxes, $54 billion. the charitable contributions, $51 billion. the exclusion of pension

benefits, $162 billion. and capital gains, $71 billion. do any of those numbers stand out to you and in particular? guest: you have picked out the largest ones. when people say locals, they are not the polls. they are major deductions. those are the primary deductions in the tax code. take each one and if you think about the mortgage deduction, the terrible, those are things that should be reformed, but it is unlikely that they can be eliminated by some people are talking about. it is first things first. let's get the high-end bush tax cuts to expire. let's lock in the savings and look at what we can do about deductions. the mortgage deduction is not well designed. if you think about the way it works, if you are a banker, because it is based on your tax rate, let's say, you have a $1 million house. and then you have a teacher with a $200,000 house.

what happens is the taxpayers actually subsidize the mortgage of the banker at 35 cents on the dollar. and only 15 cents on the dollar for the teacher. that does not make a lot of sense. there is room to reduce the subsidy rate for the banker. that is what the president has proposed, to cap those deductions of 28%. that is a step forward. and it is on top of letting the bush tax cuts expired and then protecting medicare. host: what you think about what he is saying in terms of the with the mortgage deduction works? will people see a benefit? >> if we are -- guest: if we're going to reform mortgage deductions, we would be doing it as tax reform. that is what tax increases will do if we do not care of them with some kind of spending

reform. republicans have offered a loophole closing, to use the generally accepted term puritan -- and accepted the term. it is not going to stop the drive for higher and higher tax rates for the future. it would be an intermediate step for higher taxes coming down to higher rates -- from higher rates. we need to focus on what matters, which is getting spending under control. chuck mentioned reducing debt by about $4 trillion in the next 10 years. that is the president started. i think it came out of some symbols as well. however, it seems to be -- out of sims and-bolts as well. however, it seems to be inadequate. the president says we are going to add $9 trillion in debt over

the next 10 years. but his tax increases would only bring in $1.6 trillion gerbera still almost $8 trillion been added to the debt. we will be right back in the same situation. what the next step? the president has not offered anything. democrats have not offered anything. just raising taxes does not get it done. from we're going to hear steve on the republican line. caller: i agree that all the tax cuts and alba -- you know, unless they reduce spending, it is not going to do anything. we need to create more jobs. if we keep taxing the businesses, they should just reform the tax. if a business hires so many amount of people, they will get

a deduction if they hire that amount of people. that would work. i am from buffalo. years ago, they had bethlehem steel. we have the wiper place -- i cannot remember the name, but anyway, the state gave them a tax breaks for hiring people. they start hiring people. you have to have income to spend money. the government needs more taxable people. it is like a bank account. if i give you $1 million and your spending $2 million and only taking in half a million dollars, it is not going to balance. host: do you take deductions? caller: i don't take -- make enough money to take them. every time i try to take them, they say, you did not make enough to take that out. host: what do you think of that?

caller: like i said, if they want my money, that is ok. let me put it to you this way. i do not mind paying more money if i'm working. then i have the money to pay. by not working, i do not have money to give. do you understand my point? guest: i think some of the deductions are reasonable and fair and others are flawed. i think it is biased toward high-income people. he makes the point that we need to focus on jobs today. employers do get a tax break if they hire people. the problem is, republicans are trying to will the middle class tax cut hostage for the high income ones. we need to get those extended, the middle class wants, for the -- the middle class tax cut, for the short-term.

and let the others expire. guest: we need economic growth. that is one of the best ways to get our debt and deficit under control. investors and small business owners are really who you hit when you hit the top two rates. we need to get the economy going to help get the deficit down. the caller said he did not take deductions. we should point out that everyone takes a standard deduction. whether it is an itemized deduction or a standard deduction, you are still taking a deduction for the taxes for the year prepare host: tax cuts expiring at the end of 2012, allowing high income tax cuts to expire would go -- would reduce the deficit by $950 billion over 10 years. this is from the center for

budget and policy. guest: that is a stigma of an amount of money. that is nearly $1 trillion. if the target is $4 trillion, then we can do that. all the republicans need to do is to tax -- past the middle class tax cuts and support the economy today, and allow the higher income tax cuts to expire with minimal risk to the economy. guest: we are still adding $7 trillion in national debt over the next 10 years you raise the taxes on small business and investors, you'll get slower growth. the $4 trillion is not enough. we need to be looking at the bigger number, which is the $11 billion that the congressional budget office tells us we are running over the next 10 years. higher taxes are counterproductive and they do not lower the deficit enough to make a dent. we need to focus on cutting

spending. and the drivers of a of the spending problems and the next 10 years are specifically social security and medicare. those programs have an unfunded liability of $47 trillion. that is what they would need to pay today for future benefits. host: looking at specific aspects of what is at stake with these social -- the so-called fiscal cliff. go to c-span.org/fiscalcleiff fr a clearing house of stories about it. speaker john vader was talking about negotiations yesterday. let's talk about where he sees things. [video clip]

>> the president's idea of a negotiation is to roll over and your guy asked. we need to find common ground and we need to find it quickly. >> again, because you kind of did not answer it the first time, what are the chances that we will go over the cliff? >> there is clearly a chance but let me tell you, i might be an easy guy to get along with. in ausly, i've worked bipartisan way on a number of agreements. but i am determined to solve our debt problem. and we have a serious spending problem and is going to be dealt with. >> and if the white house is unwilling to deal with it, are you prepared to -- >> we are going to deal with america's debt problem. >> and if they do it in a way that is unacceptable to you?

>> we are going to deal with it. we are not going to kick the can down the road anymore. >> so if id -- if he kicks it, you're going over the cliff? greta i don't want any part in going over the cliff. host: where republicans are bargaining in terms of looking at the tax code? guest: they have offered that. the speaker boehner came out right after the election and said he would look at revenue. he said, let's lower tax rates, but expand the tax base. you put that on the table for the president. that is at least the second time. host: and what the polls would be taken out? guest: it depends on the process that they go trooper -- they go through the biggest loopholes are by far the exclusion for health insurance.

if you are going to design a system from scratch, intertwined the health insurance system with the tax system. we cannot change it overnight and expect it not to collapse. we would need to create some kind of credit for individual health insurance. we should not be taxing savings. you can exempt savings or exempt the yield you get from savings. we would not close that again for raising revenue. it comes down to the political process as to how you are going to get rates lower. but again, the offer is out there from speaker pena. the president has not taken them upon -- speaker dana. the president has not taken empirin.

but treasury secretary geithner was on abc this week. let's take a look. [video clip] >> i think we are making a little bit of progress, but we are still some distance apart. what we are trying to do is not just prevent a tax increase on 98% of americans. and there is no reason we cannot do that. but we are trying to go beyond that and look at what is good for the future of the american economy. >> you say you are getting closer. they say -- they say you are getting much further apart and that this is not even a serious proposal that is designed to fail. >> we think we have a very good mix of tax reforms to raise taxes on the wealthiest americans, combined with a very comprehensive, very well designed, very detailed savings to get us back to a place where it is sustainable.

if we can do that, we can create some things to make us stronger, like rebuilding american infrastructure. we think those are good investments in america. host: what do you think? guest: the president is in a very strong position coming off the campaign. he had a detailed plan before the congress that has wide support. the problem for speaker boehner is that he's in an untenable position. he's saying, let's hold the middle class tax cut hostage to try to get leverage. the higher class tax cuts are very popular. and speaker boehner has talked about loopholes and medicare

that he wants to cut, but he has not laid out specifically which ones he would cut. he has not been deposited at all on medicare. the president has been specific on all of these things. guest: we had the right and budget, which was very specific on all of these things. -- of the paul reihan budget, which was very positive on all these things. democrats hammered those cuts as a savage. they hammered them again when it came out with reconciliation cuts. we forget that the republicans passed two bills that take care of the fiscal cliff. they extend of the tax cuts and a change the sequestration. the democrats hammer them on that each time. they are not going to give the democrats a chance to hammer them once again. host: our democrats putting

deductions and loopholes and specifically on the table? guest: yes, the president has been very specific. he has said, first things first, let's let the high end tax cuts expire and lock in these trillion dollars savings. then he says on deductions, let's cap the major ones, the mortgage interest, the charitable, the state allen local -- and local. the banker's comments of getting 35% subsidy on the mortgage, he will get 20%. -- 28%. and then there are tax cuts in medicare, but they are reasonable. if you do not do these tax deductions and you do not do the high end incumbent bush tax cuts, it gets in devastated. the ryan budget was very back loaded. and it was not in the first 10 years. there are trade-offs.

host: maverick writes in and said, i see a problem giving tax -- a problem with giving tax credits for hiring unless employees make a living wage. thomas is up next from south carolina on our democrats line. caller: we are down here in foggy south carolina. thank you for c-span. host: thank you. caller: something that has come to my view on a c-span program the and i, two republicans and one democrat -- the other night, two republicans and one democrat were expressing a need for a trust fund to finance infrastructure, which we need very badly, which would put people back to work from some

form of tax on the infrastructure that we build. it is the duty of our government to do things for people that they cannot do themselves. the rich can do for themselves. the poor people cannot. i'll hang up and listen. host: let's go to curtis dubay. guest: we keep hearing about infrastructure investment. but the way we do that is federal gaps. the 65 cents of every dollar raised for the federal gas tax actually goes to roads and bridges and highways. the rest of it goes to things that are not supposed to be funded by the attacks. sustainability projects, bike paths, roadside museums.

i would much rather see us spending all of the money on infrastructure and then come back in five or 10 years and say, well, maybe then. we are spending the money on infrastructure. it is a weak argument. .ost: let's go to laura caller: i have two comments to make. the first is, the bush tax cut entitlements were supposed to be temporary. i remember when they were argued, and as far as i'm concerned, republicans live at that time. they never intended it to be temporary. they intended it to starve the government, which is a constitutional government. that makes me very angry. the other point i have to make is that i'm one of the long-term unemployed. right now, all of these discussions are noise.

the root cause problem is a lack of jobs and offshore in that has gone unchecked since 2000. if i do not have a job, i cannot contribute to my country. if i do not have a job, i cannot pursue life, liberty, and have it is. i cannot raise my child or pay for my house her i cannot do anything because there is no revenue coming in. all i hear are the republicans wining about the upper 2% not having their golf money. host: laura calling in from austin, texas. earlier we talked but the bush tax cuts and whether they were indeed intended to be temporary or not. the loopholes, are they intended to be deborah? or are they here tuesday? -- to be temporary? are they here to stay? guest: they were intended to be

permanent. you cannot assign -- underestimate how hard it would be to cut those. this is why reluctant -- republicans are reluctant to propose this was a big changes. you need to get that money from the high end of the bush tax cuts and then see what reform you can propose. host: let's hear from charles in georgia. democrats line. caller: i want to know why it is so difficult for the 2% to pay their fair share. everyone is saying they have generated jobs. i have not seen a job generated yet. host: you take itemize deductions? caller: i am a military retiree. since i retired, the jobs have just not been here. this is the president came back into office complex it is coming

back slowly around. they keep talking about jobs, but i have not seen any. host: the second caller in a row complaining about the idea that the wealthiest americans will not let go of their bush era tax rate. guest: i do not like to talk about fair share because there is very subjective. but let's look up the numbers. the president said people over the $1 million tax rates should pay a higher percentage, the so- called about the role. according to the cdo cannot the top one burn -- the cbo, the top 1% is paying an effective tax rate that is three times higher than the middle class. viewers can make their own decision as to whether that is fair. break down the federal income taxes. again, that is 40%.

by comparison, if you had a flat tax, if they owned 20% of income, they would pay 24% -- 20%. and back to job creation, we will get less job creation. we are talking are raising taxes on small businesses and investors. guest: governor romney tried to make the case that occurred as is making. it has failed miserably. it has failed in history. if it fails from campaign economics. the bush tax cuts disproportionately benefit high- income people. if we get rid of those we will save a lot of money and there is minimal risk to the short term income. high income, whether you are with a wall street bond trader or a ceo of a corporation, they tend to be less vulnerable to the ups and downs of their

income and middle class people prepare -- people. linney to support those people. that will lock in a savings again. -- we need to support those people. that will lock in savings again. host: next caller. get -- and can't we do away with the federal reserve? if they don't have a arwin power, they cannot have debt. -- if they do not have borrowing power, they do not have debt. that we cannot borrow money from china. let's do away with it. everybody buckle down for a decade and let's get this thing came down.

host: let's go to our next caller in massachusetts. the democrats line. caller: looking at the we go back -- at the fiscal cliff, we go back to 2001 with the lowering of the tax rates, meant to create jobs. but in the past 10 or 11 years, we have not had any job creation whatsoever. we keep going back and hearing over and over again that it's going to cost jobs. we do not have jobs to begin with. businesses are out to make money. if consumers do not have money to spend, then you can lower their taxes to 0%. they still cannot spend because they do not have any income. guest: i think that is a great

point. it brings up one thing we have not mentioned yet. the payroll tax cut is about to expire. if that expires, every paycheck in the country is going to go down about $1,000 on january 1st. that would hurt consumption. it would hurt the customers of businesses. the president has proposed to extend that. i think that is reasonable. we will see a firm public and keep up their opposition or they give in. we have a sleeper here that cannot be ignored. if we do not extend that, every paycheck in the country is going to go down. >> i agree -- guest: i agree. we should extend that for another year. it would be a big hit to the middle class paychecks. we are in no position to be hurting the middle class at this point. until now, there has been

bipartisan agreement that would probably be allowed to expire. the president has changed his calculation on that in the past week. i think that would be smart. host: in looking at the mortgage and real-estate deductions, you can see by category who benefits and how it breaks down. you can see how much money they get for their tax return. in dark blue we see the mortgage interest deduction and a light blue, the real estate tax deduction. we are talking about loopholes and deductions as part of the so-called fiscal cliff. ron in indiana prepared -- indiana. caller: the first young fellow. the question that i wanted to ask. everybody is talking about raising taxes on the job creators and they will not

create jobs. these bush tax cuts have been in place. how long will it take to see the job? host: what do you think of the deductions? you think they have been a part of the tax code lot of that americans cannot do without them? caller: some of them need to be part of the negotiations. middle class people, we cannot. forget them. but the average class, they get the big tax cut. -- the upper class, they get the big tax cut. the middle class does not hardly see these deductions. and especially those that give you these deductions, they give you loopholes. to curtis dubay to get a response to that. our caller was talking about if

you have the means to hire someone that has the ability to look through the deductions you can get a much better break. is it fair? guest: if you do not have someone to show you how to do it, it can be hard to take them. but for the most part, most people will take the standard deduction. they do not need to hire someone to take itemize deductions that they will not be able to take any way. that is the point of the bush era tax policies not creating jobs. if you look at where we were back then, we were in recession when these tax cuts went into effect. they were always meant to be permanent. there were supposed to help the economy help growth going forward. we had a recession as part of the last decade. we have fairly strong growth from 2003 through 2007.

we are still feeling the fallout from that today. raising tax rates on job creators and small businesses will cut back on job creation. we will see those who would have otherwise gone back to work failing to get a job going forward. guest: most small businesses are small. 97% of small businesses, their portions are tied to the middle class. it is important for their tax cuts to be extended. it is much less important for the high-income people to have theirs extended. if you're talking about the ceo who wants to play golf and also by a vote, maybe there could be more incentive to play god, and -- to play golf, and work a

little less. what economists find is the the work ethic for the high-income people is not very sensitive at all to the change in tax rates. that is why the cbo says that if the high end tax cuts go away, growth rates will only be affected by one-tenth of 1%, which is a tiny fraction of the affect on the middle class. host: someone writes in, if the tax rate did not hurt small businesses, then why should it now? and here is another. guest: basically, 2% or 3% of small businesses would pay the higher number. most small businesses are people selling items out of their

basement on e-bay. those that create jobs, they are in the 2% of small businesses. they would pay higher rates that president obama is proposing. it would be a direct hit on job creation. and over and talk about raising tax rates at the top, it is not because we are worried about whether the rich can buy an extra vote. we are worried about their ability to invest in the economy. host: let's hear from mary in topeka, kansas. caller: i had a couple of comments. and then maybe let them answer. one, a republican, but i guess i'm not a very loyal one because at this point, between the republicans and the democrats, i am totally fed up with what

comes across on the national news. both sides seem to be spending the truth in july's for their own political gain. -- into lies for their own political gain. we need a solution that is not 25 years away. but i do not know how it is going to be done when the president -- and as far as i can see, he has not even sat down for a talk that lasts more than an hour or so. he has other people doing is talking and expects the republicans to try to make a deal. you cannot make a deal with a third party and then have a first party reject everything on the plan and never sit down and discuss it. you cannot make a deal when you are not doing face-to-face

talks. host: what do you think should be up for negotiation? and things like reductions in taxes? -- reductions in taxes? caller: i'm self-employed. i cannot make enough money working a regular job. and my employees -- employers will not pay me a livable wage. and not only that, they do not want to give me, 40 hours a week. they want to give me 38 and pay $9 an hour. host: if you can broaden that out, chuck, and talk about negotiations in general. how much should the american public know about how much the mortgage deduction is on the chopping block? guest: i think they should know everything. both sides should be specific and public, which is what the president has done. he has said, let's make the

middle class tax cut permanent. he has said we need to lock in the savings. he has said that the higher income deductions need to be cut. he has said to trim medicare, but in a modest way. republicans are trying to protect the very popular high- end bush tax cuts. how do they make that up? they cut mortgage deductions that we've been talking about, and medicare. and they want to cut both of those, but it seems they are afraid to say that. if the republicans do not want to let the high end push tax cuts sunset, how will they make up that money? how much from medicare? how much from the mortgage deduction, a charitable deduction? people deserve to know that. host: here is a tweet. we need a flat tax and stop all the flap in. guest: that would be great.

we have a flat tax at the heritage foundation. you can see it at the website. there has been an effort in the last couple of weeks to broaden the appeal -- a negotiation to something bigger than a grand bargain. i think that is largely misplaced. let's focus on the issues that are most pertinent right now, which is let's focus to what matters by the end of the year. host: thank you >> reporters had a closed-door briefing to outline a counter proposal about the fiscal cliff. let's hear the latest proposal.

>> it would be about 2.2 trillion dollars in additional deficit reduction on top of what has already been enacted, and they say compared to the white house, when using the same as the white house, it would be 4.6 trillion dollars in deficit reduction over 10 years, and that includes $800 million in new tax revenue of the republicans say would come from tax reform but not from increasing tax rates, which has been a sticking point. >> are we talking about bush era tax rates? >> there are questions all of the bush era tax rates would be extended into next year. it would be in that process they would generate the $800 billion in new revenue, and that would

be through capping deductions, eliminating loopholes, and they say and who $800 billion could be raised without raising tax rates, and that is in dispute with the white house. the white house has said there would been on and on and no deals unless you look for greece to increase tax rates on the wealthy next year. >> what do they say about sequestration's and also changes to entitlement programs? >> interestingly, the debt limit does not address in this proposal. you will collin they proposed a change in the way the debt limit who was released. if you are asking their aides, and they tell us the speaker would be open to increasing the debt limit, but he is sticking

to his rule that it must be accompanied by cuts and spending reform equal to or greater than the increase. it could be put on the table for negotiation. they are not laying out specific changes to medicare and medicaid. they want $600 billion in health savings. they mention things that have been mentioned for a year-and-a- half, including the eligibility age for medicare for a number of years and also means testing medicare benefits so they either pay more in premiums or receive less in benefits.

the change to social security is also something that has come up repeatedly in these negotiations, which is a change to the way the benefits year- over-year are calculated for the purpose of determining these benefits, so that would affect social security, medicare, and a range of policies, so that has been approached often in negotiations. >> what is the ndp saying about automatic spending cuts -- what is the gp saying about spending cuts? >> that is not addressed in their offer. their offer is for 2.2 trillion dollars, so they have been talking about the way to replace and find alternatives ts that would be equal to or

exceed 1.2 trillion dollars. if this offer were accepted, the sequester would be eliminated at the same time. >> have house republicans given any ground to this proposal? >> it is essentially our return -- a return. it is similar to what the former clinton chief of staff -- separate from that commission, he testified before the super committee last year and put forward his own proposal to try to break the impasse at that time. republicans say their current offer is not in that proposal, so it is not the simpsons-bowles plan that has gotten a lot of talk over the last few years, but it is modeled on a proposal from a leading democrat during

these discussions, so they are hoping it will give some credibility going forward. the $800 billion they are offering is not the same as what john boehner offered in 2007. -- is the same as what john boehner offered in 2007. they will not accept any deal that keeps tax rates the same as well. >> thank you. >> thank you. >> you can read his proposal online by going to c-span.org and clicking to the lake. oklahoma congressman tom cole discusses the fiscal cliff negotiations and agrees with

suggestions they should join president obama to extend the tax rates for the highest income earners the law professor john buckley looks at the history of the tax, plus your e-mails, phone calls, and tweets. in a few moments, a forum on energy security. in a little less than an hour and a half, 20 years since russia and the u.s. agreed to secure and nuclear weapons in the former soviet states, and a look at proposals but could be negotiations over the fiscal cliff.

>> we are at the new york state museum. this is dedicated to the history of september 11 and the attacks at the world trade center. we have established the gallery to tell the story of the first moments of the attack using photographs from the world trade center site. there is a piece of steel. we put it in a place where the public can come and touch it. it gives a tangible experience. this is a piece of steel from the north towers. this is a dramatically bent piece of steel. this is within 10 floors of the impact, and you can see the openings with this piece of

metal strips that would have held aluminum. every piece of steel marks which side of the building it was on, so we researched that. it was so close to impact, it actually has a shock numbers -- chalk numbers and the time of construction. >> join booktv and local content vehicles as we look behind the scenes at the literary life of new york's capital city, saturday at noon eastern. >> a report by the group securing america's future energy and with the greatest threat to economic -- says the

greatest threat to economic security is dependent on foreign oil. they are suggesting a plan of maximizing oil and gas production and improving conservation, to reduce revenue and decrease our debt. >> good evening. we are nothing without their credibility as the great ceo's and leaders of our time i want to give of thanks to the staff. we stand on their shoulders and the hard work and time they spent with the leadership council, the policies staff to

put these events together, our public local staff we did our political staff and the rest. we are seeing more production than we have seen before. the last couple decades of year on year growth. the demand for oil continues to decline based on fuel economy standards and other reasons, yet we continue to have a problem. i think the report we are , its subtitley compan says it all, are missing american resources. how do we leverage the abundance

we have in the united states to our maximum benefit? at the time washington is talking about our fiscal crisis, i would say the relationship is close. it might not solve our fiscal crisis, but it is a necessary in agreement. if we do not have continued growth, we can cut all we want, and we can raise revenue all we want. we will never find a way to solve our fiscal problems. this report looks at how do we leverage this great blessing in the united states common and both resources and our skills to help the country and put us in a .ood for daioting this is the beginning of a

process of creating a bipartisan consensus on energy policies. we are trying to escape that zero sum game. nbc -- we see a unifying vision where people do not have do compromise principles. the environmental community can see a reduction in the amount of carbon and an improvement. and we can weave more resources at home -- lead more resources althome and spend less wel abroad. we see this as creating an incentive. we are excited to work with all

legislators to implement these recommendations and see it through to their fulfillment. i would like to call mr. fred smith, the chairman and founder. he needs no introduction. he birds about 1.5 billion gallons of fuel a it -- burns about 1.5 billion gallons of fuel a year. the truth is what it has done in our economy is groundbreaking. what they see in terms of economic growth in our country, they cut every industry as well as transportation to make our economy grow and thrive.

i think he is well-suited to discuss this issue. i thank him for joining us. thank you. [applause] bynes thank you. i became involved out of self interested primarily because of the energy intensity of fedex, which operates over 90,000 vehicles and 700 airplanes, and i was recruited to this endeavor by our chairman, who correctly pointed out to me when i first came aboard some years ago that after nuclear proliferation and terrorism, our

dependence on imported petroleum from in hospitable areas of the world was our longest single national security issue. a group of business executives like myself and the ceo of waste management and other major companies that use a lot of energy and our naval officers who understand clearly this nexus of economic security and national security. we have been involved in the middle east in the past quarter century in three shooting wars at great tragedy to our country with young lives lost, and the

treasures extended and the foreign relations it has engendered, and at the end of the day all roads lead to this dependence on foreign petroleum. in 2009 we were importing 60% of daily petroleum needs, and we had about 20 million barrels a day in this country. today we are down to about 40% in terms of petroleum being imported, but it is important to recognize we are still spending about $60 billion a month to imports that petroleum. this problem has been going on since 1973 with the first oil embargo.

he mentioned every economic contraction this country has had, including the financial meltdown of 2008. the oil market is not a free market. the marginal barrel of production is controlled by the opec cartel, the organization that meets twice a year to establish " those in order to keep prices at an acceptable level for opec exporters. the national oil companies of opec and other countries around the world hold a vast majority of oil reserves, over 80%. they produce only 40% of the world's petroleum every day. there is a chart that shows this graphically.

if there is ever an example of a market that is not free, it is not bad. nobody operates in that manner in a purely free market. if opec were doing what it does abroad in this country, it would violation ofd a antitrust laws. goothe prescription was very imt falls -- impactful and was based on our report of 2007, which said the united states should maximize oil and gas production , that it should reduce consumption and improve conservation, which led to the direct report for the

reinstitution of fuel efficiency standards, which had not been done for 20 years, and to develop to the extent it was economically viable of biofuel substitute for petroleum. this new report continues these themes with a couple of important caveat, the most important of which is the technical revolution that has taken place since our original report and are intermediate report until this so-called fracking revolution for oil and gas and at the same time a significant improvement now in the efficiency that has been brought about by technology and fuel efficiency standards enacted by the bush administration first and then

were increased by the obama administration. it is important to recognize the report is not political in any way, shape, or form. it endorses things heartily supported by the right in some cases and that are supported by people on the left. it is important to recognize you cannot just take the parts you like. you have to take a holistic izeroach, which is to maximu u.s. production and reduce consumption partly by diversifying our transportation sector away from petroleum. the last thing i will say before i sit down, it is important to recognize petroleum used in transportation is the pivot point of this problem. about 70% of our 18.7 million

barrels a day use of petroleum in this country is for transportation, and transportation has fueled about 93% of the time by petroleum co. so if you want to reduce the united states and dependents on important new petroleum and the geopolitical issues that causes, particularly in the era when rising demand is creating potential conflicts for these resources, you have to recognize transportation has to be diversified away from petroleum where the prices are set in the world market. canada has been a net exporter, but they pay the same market price for a gallon of gasoline as we do, so you must diversify,

and that includes electrification of short-haul transportation and the adoption of natural gas for heavy-duty vehicles like waste management trucks or over the road vehicles. taken as of hole, --as a the united states has the potential to reduce our dependence on imported petroleum and thereby hope our national security risk to improve our balance of payments and about half of our balance of payments remains petroleum. and to increase gdp by the maximization of these activities in the united states rather than exporting abroad.

can we sit down now? >> our panel discussion is about to begin featuring the senator and our moderator. >> can you hear me now? good morning, everyone. i'm in lazy moderator.

want to talk about this report, talk about the future of energy in this country and the future of transportation. i want to make sure you know to please jump in. i don't want to ask a question and ask another question. do we all agree? wonderful. let me start with fred. we have heard about this new found or renewed abundance for energy. i have heard people this week, saudi america. we have all this energy. how do we leverage it and harness it? >> it is important to take the hyperbole of comments like

america being the new saudi arabia of energy and put it in perspective. we're burning about 18.7 billions of liquid fuels today. we produce after an incredible increase of domestic production about 6.5 billion barrels of oil per day. when you take biofuels and the natural gas liquids, it is about 9 million barrels per day. we are still importing an enormous amount of petroleum. the first thing about our recommendation is to maximize u.s. oil and gas production everywhere, in alaska, offshore, it is coast, west

coast, gulf coast, in new york, pennsylvania, in the eagle ford areas. that has enormous implications in terms of gdp growth. because of the enormity of the issue, you have to continue to reduce demand. >> what role should the government play in the future -- your business is in transportation, too -- we are mired in conversations about the fiscal cliff. we are talking about long-term infrastructure, a long term energy plan.

>> this is the perfect opportunity for the government to work together to achieve a common goal. there is plenty of times when our interest might not call last with the interest of either of the parties. this is the opportunity we have never had before. you could have consumer, business, and the government's all working together to take advantage of this huge resource. for us, it makes so much sense because it makes business sense. we get about $1.65 a quilt when natural gas. from the government point of view, everybody is talking about jobs and the fiscal cliff. everyone talks about taxes and

what is going to happen with the fiscal cliff. there has been $1500 gone to increase oil prices. you can get them that tax cut today if you invested in our report. everybody talks about entitlements. high oil prices make the social security trust insolvent five years sooner than they would if he did not have high oil prices. america needs jobs and growth. following the recommendations in our report will lead to both of those. it would be good for american business. >> i will start with senator alexander.

tell me about energy policy and where it fits in with the fiscal cliff. what we will spend money on and how we were tightened our belts. >> the major place it fits is the right policy would create an environment which would produce a lot more revenue. that would help to reduce the debt. the federal government doesn't spend much money on energy. energy research is about $6 billion a year. i would like to see it doubled. this report is a blueprint for independence and i think it is the right blueprint. we are not in a position to be

held hostage by anybody. it also focuses on find more and use less. what we can do in the federal government is i think invest in research and getting a 500-mile battery for electric cars and getting solar energy that is 1 kilowatt installed and finding a way to capture carbon from coal plants that can be turned into fuel that is commercially sold. we should look at the model of unconventional gas in terms of how our system and federal research and our system of private properties have produced a situation where we have a massive advantage over europe and asia in terms of our

natural gas. it creates a better economy and that reduces the debt. >> there is a headline predicting we will be producing more oil than saudi arabia beginning in 2020. this is something almost on imagined 10 years ago. what is the role of the federal government? >> to do things that encouraged the results. you can solve this fiscal problem if you grow our role to position relative to everybody else's. a big problem is the percentage of government spending is more than its should be related to total gdp. if there is an easier for millet in the history of

economics that more american energy equals more american jobs, i don't know what it is. it is all the jobs you have if you of a reliable supply of energy. the front page of the "the wall street journal" indicates a difficulty of connecting this cheap product we have in natural gas. we thought we would run out natural-gas as a country. connecting this cheap product with a more expensive market and getting it overseas. if we could become energy self- sufficient, that does not mean we would not buy on the world market, but if we could meet our needs in the north american

markets, almost all of that money comes back to us. we have no better trading partner than canada. nafta has increased the trading capacity of mexico. it has gone somewhere from the 40% range and a growing and, catching up with canada. when you buy energy in north america, they give you the money back. that was a lot to solve the problems. if you make your position better as a nation, suddenly, your numbers begin to where they need to be relative to the rest of the economy. >> you said this is one of the most important issues facing america.

why do you think it is such an important issue? >> transportation and the availability, the means to get there, what we do with it, it is without a question in my mind, being a marine and an infantry officer, it is the most important problem facing the united states for several reasons. first, i do not believe that the american public truly understands the transportation in the availability of the resources to solve the problem. i think we need an education program by learned scholars, such as those in this audience to help us in getting this word out to america. i think it is essential because it is coming on very fast. there are things that are happening that we take for

granted. as an example, we take for granted the fact that we can move thousands and thousands of marines, sailors, soldiers and have the equipment without any burden to carry economy, not true. the truth of the matter is is a tremendous burden to our economy to have a national- security policy that defends the country that we love so much. without having the ability and willingness to get out and give the american public forums such as this in helping giving us answers to some of the very difficult questions that they ask, i want to take this opportunity to think robby for what he does. i met him some years ago when he found my office in an office building. he came in and we had a chat and i said, my goodness, this fellow knows what he is talking

about and he has never disappointed me whatsoever. what we need to do is explain to the american public things such as the fact that you cannot move thousands of troops and their equipment down all the other things that go along with it free of charge. it has a price tag that is quite large, but it is in the best interests of the united states. to answer your question, i think we need a very cultured energy policy that we, the people in this room like you and me, we can inform the american public that this is a problem and this is a way we propose to fix it. >> thank you. you are passionate about this subject, i can tell. let's talk more about the military. you talk about moving people

and machinery. there are some of the other esteemed leaders of america's military here. what about american national interests in other parts of the world? and general conway, how does that change if we have an abundance of energy that we are able to harness in this country? >> it changes it. i would say my sense is that we are on a long drive. as opposed to grasping in the dark as we may have thought of 10 years ago, we are driving into sunlight. as has been pointed out, we still depend on foreign sources for about 40% of our energy requirements. in my mind, that still creates a critical vulnerability, maybe

even a central gravity. 2013 will be a very interesting year and it will be a long time before we are totally energy dependent. to your question and, i think we need to be conscious of what decisions we can make as a nation. today, our economy as much more consideration on the part of great military minds than ever before. as we look to give it to the pacific for good and just reasons, we do so with full knowledge that we get our primary raw resource from the middle east, from africa, from the americas, and to a lesser degree, from europe. we need to be conscious of what the requirement is as we make military decisions. this vulnerability you we will phase, i believe we will for some time. >> we also have an economic competitor and a partner in china. they have a voracious appetite for natural resources and we're

looking at new ways to get these in our own backyard, and maybe i will ask you this question, admiral. how important is the china factor in america energy program's going forward? >> i will talk to doubt, but i would like to mention a few puffs things about this report that may not have come out in your opening remarks. we definitely advocating opening of drilling in the united states where we cannot, but there is a very strong part of this report that says it has to be done safely and we know how to do it safely. that is one contribution of those of us who have served in the armed forces, we do a lot of dangerous stuff in the armed forces, fuel, nuclear power, explosives. the way we do that safely is a

high standards, rigid enforcement, and very professional inspectors to do it. we strongly recommend applying this model to regulatory body so that we can do this safely, so that we can do oil retractions safely. that we can do safely. the general and i live in pennsylvania and we want our water to be drinkable, our streams usable, but we believe firmly that can be done if you enforce these standards. the second thing is that we do advocate a federal role and a non-pre-market to try to open up possibilities to this country for more different kinds of energy, but we are definitely concentrating on creating the conditions part of this. we are not talking about creating winners and losers in developed industries. we're talking about opening up to alternatives to today's petroleum based internal combustion engines so that we

reduce our national security dependence on the oil that is coming from, in many cases, unstable countries and also regimes that do not wish us well, and quite the opposite. china and india are causing the trend that will drive the cost of petroleum up, so no matter what we do, the balance of payments is worse, so from the economic point of view, it is china's role as they seek to achieve wealth and prosperity, which they want and which we want them to have that causes us to look elsewhere for these alternatives so that we are not hurt by their success but we have alternatives for ourselves. >> can i have you weigh in on

the importance for how these new trends in energy production may change where we are acting in what we're doing in the rest of the world? >> there is a lot of talk about if this will change our focus in the middle east, but countries that are self- sufficient still pay the same market price than the world market, so that will not change. i think we will still have an interest in the middle east and we will still have some emphasis there but it gives us more leverage, better options. it improves our flexibility, of this rebalancing of our national security policies in the pacific, an area where we need to pay closer attention that i hope can be done in a constructive way of as we

develop our relationship with china. i think it gives us more flexibility, leverage, options and it hopes with resilience. overall, the foundation of military power, no matter how great and good we are, the bedrock, the thing we build our national security leverage on is a well functioning economy. we need to show the world we can get our economy under control, reduce the deficit, and begin to show leadership in various areas of new technology that demonstrated here to the rest of the world. kohl will always be there. there's lots of work there. all the sales will help, i think, of leverage our capability and give us more options.

>> let me bring you in. 92% of american transportation is run on petroleum. with this new landscape for energy production of, how are we doing on diversifying different kinds of things that are running our transportation? >> so far, it is going slow. something that was deeply focused on was something note senator alexander said earlier. we need to find more and use less. i think you're asking about the use less part. the extension of the changing fuel efficiency standards was one thing, but we believe fervently in the need to diversify away from using petroleum for transportation and given that it represents 70%

of our use of petroleum to begin with. with the change in technology and the access to so much homegrown natural gas, we can use that and we can also use the development of electricity and its usability in automobiles and light trucks. >> what about the role of the government? find more coming years last, and someone has to make sure we are not doing dangerous things, as the admiral pointed out. >> i am a private sector guy, and i believe in the application of private and free markets for the development of our country, but there are times it is clear when the government has an unfortunate role to play. in fred's introductory comments, the argument was very clear. the market for oil, on which we depend, is not a free market. the only way we can respond to

that is an activist approach. that does not mean it has to be very expensive, but we need to develop a coherent policy. the fact that are recommended proposals are supported by people typically on the right side of the dial and others are typically supported by the left should suggest to you that this is not an ideological game. this is about trying to come up with a set of proposals that are good for our country overall. the lack of ideological support should be viewed as a positive. >> ways to see you. >> thanks. i apologize for the fact that i do not control my life for scheduled to much. >> nothing going on in your world. now that we have brought you from the edge of the fiscal cliff, let's talk about these for a moment.

you have seen the headlines that say, saudi america. we have this new found richness, new technologies to find energy. i have seen some estimates up to 3 million new jobs directly related to the energy boom. is it real? how unfortunate of a driver will that be for the economy? when you're sitting down trying to figure out what growth will look like in this country, how does a factor in? >> in a few ways. number one, if there's one thing i feel more optimistic than i did one decade ago, i had a book out around 2006 and i felt like, when you are out making the case for why there should be more location as opposed to china and india, you felt like you how the wind in your face. you have great meetings but then they pull your side and say, that's a powerful argument,

but we're moving this to bangalor next week. there is much more of an economic case for people to be relocating and bring jobs back. some of that is about the way it is structured between us and china and some of it is energy. no doubt the future of natural gas is just making the price calculation more attractive to someone thinking about a new location and, in a planned of being in the united states. energy, the lower cost a promised natural-gas is a promised economic factor in location decisions making it more competitive. that point was driven less by democrats and republicans and really the consulting community making this case to their clients and that is now getting out.

i think that is one thing. secondly, as we have seen, and others would say, we are not dependent on foreign oil as much as the global oil markets. when oil markets are volatile, it brings in volatility to our economy. we felt it both in 2011 and an 2012. buchanan prevented, but to have the volatility have such an impact, we were fortunate. we put in a payroll tax cut that would cushion people's consumer spending a bit, but when you are in a tenuous time, as we has been the, the fact that the volatility can have such an effect on consumer confidence, we all know that americans are over affected by consumer confidence factors. they are bothered by sudden spikes in gasoline prices more than economics tell you that they should be.

and, obviously, jobs related to the actual increase in oil and natural gas production and have an industry is based off of alternative fuels, a think that is all very productive. one thing i want to say since we are in this time where no one seems to be getting along is that, one place where i see a real bipartisan agreement, they have an excellent bill on electric vehicles where they have an idea that maybe you have already talked about, but i believe so much in that type of thing. to be able to show something working somewhere from the first time 60 minutes or cnn and is able to do a story where you show a community where it is easy and the incentives are there two years on alternative

vehicle, i know what will happen. every mayor will see that, really the people come and say, why cannot we do this? having this deployment community proposal that senator blogged and alexander have as, i think, the type of thing you have to do to create momentum. you have to show success and usability. you look at that in the 54.5% goal by 2025 in there, and i think that creates real momentum. all of these things are good for certainty, good for bringing jobs back, and creating economic activity as this becomes the place to not only explore and their research on but the ploy alternative vehicles and alternative vehicle technology. >> i will seize on that with the bipartisanship because we will not smell that in the next three weeks.

let's talk about the deployment idea. >> the idea is for the government to help create models to see what works and how it can work. i think he said it very well. you have the story about how this community is responding to this infrastructure that makes it easier to have an electric car or natural gas-powered car and you see what happens. senator brown alexander has been a real leader in this and he even has an electric car. he is going the distance here, walking the walk. that's the kind of thing government can do. government can do a lot on the regulatory side to slow things down if you forget to have effective cost-benefit analysis, but it can do a lot on

the project side to really find something that works and the community becomes the laboratory for change and that others can then model. you do not have to do it everywhere and if you can show in water to a location that there really work. that is the driving force behind the idea of that lamar has been a significant spokesperson for. >> do like that car? >> i do like it. i have driven my leaf. i live in this building in a plug in the wall when i go home at night. that's all i have to do. deployment communities are a good idea. sometimes the government can have a demonstration project that makes a difference. they did a hydraulic factory and we have had fracking are around forever. three things made a difference in it.

one was a huge to demonstrate that you could do it in a big way which was helpful. the second was the laboratory inventing 3d mapping. it was the entrepreneurs and the people who was the land that made the difference. iolite the deployment communities, but i prefer research and development. i take the $14 billion and we would spend on windmills and put it on energy research. that's a mature technology, but if you want to sell a lot of those lef's the key is to get the cost from $30,000 down to $20,000 and the key would be a 500,000 mile battery. this little agency in the department of energy has a research project that they are funding which is a double the

density of lithium batteries for cars. that's exactly where we ought to go. they would also have a project to turn a microbe into commercial fuel. and that would work, that's the holy grail of energy. it is also working on solar power and $1 per kilowatt installed. that's precisely what we should do and does not cost much in federal money. we spend $6 billion per year on energy research. we could double that over five years on those kinds of projects and i think you would be the most voluble thing we could do which is perfectly consistent with many of the recommendations in this report. >> we will take some questions from the audience, but i wanted

to make sure everyone got a chance to weigh in on what you think the role government should be. companies, governments, and citizens in trying to figure out a national problem. >> hello, thank you. the government needs to recognize that for us to be economically competitive, we need a reliable and economic source of energy. the four alternatives are available, which are economic and reliable, we have to make sure the resources are economical. yes, we can increase the oil production and, but if we maintain a free market, the prices will depend on global pricing. one more point i would like to make regarding conventional energy, the history of the internal combustion engine, we are spending a 15% less and there is a huge amount of improvement that is possible.

of that improvement happens, which i'm confident that it will, it will attack the problem at the root, where we're using a lot less oil and creating less carbon dioxide. the federal government recognizes that the internal combustion engine is going to power in the near future or the medium future, the alternatives will be ready for prime time and that would be helpful economically house well. >> whenever time of transition we make in how we power the country or powered transportation, it's going to take a long time. there's no reason for that to be painful if we can bridge that

-- but how long it will take people to replace the vehicles they have now, whether new camry for that replacement or not and what you can do, but just realistic understanding that if we knew what was going replace the internal combustion engine for transportation and, it will be decades before every family in america got there and that is probably the right way to do it. understanding that and reliable, dependable -- something you know will be there, it allows your economy to grow in unbelievable ways. we have a potential here to really launch our economy in a way that not only helps us but helps the whole world who will anchor around a strong and growing u.s. economy and they all know it.

there is no country in the world for the people in charge do not understand that they benefit from a strong, dependable, secure u.s. economy and energy is the key, i think. >> christine, can i just say something here? i think one program we have done in securing american pricing energy and is something of note that many of us have seen. i think it speaks to several key messages. just as we did in 2005, they're just as relevant today when we were importing 60% vs. 40% and continuing to go down. they also fall along what senator blunt said house well. but you see from when we have the oil crisis, there is no such thing as energy independence. some fear we define the problem as energy independence and it is all about imported oil. but then we solve a problem.

we have been saying we needed to end our dependence on foreign oil, but the truth is we have a dependence on oil and any thing that happens anywhere in the world affects us here. if we miss diagnose the problem, we come up with the wrong solution. at the time, in a lot of sense. it's catchy. the public understands, but i think we need educating continue talking about this with the american public. if you missed diagnosed the problem, you have the wrong solution. the problem is one of energy

security and resiliency. the second thing you learn in that simulation every time the cabinet runs through it is it never fails, they always turn around to me on the panel proper words and they say, i wish the hon done this 10 years ago. that is what senator blunt was saying. there are no good short-term solutions but there are really go long-term solutions but you have have the policy in place in order to have them matter. that is why when we put together the strategy, we continue to talk about producing more coming using it more efficiently so our economy is more insulated from the shock as well as finding alternatives so that we are not completely hostage to this global market and that cartel. the unique the policies in place today in order to have that in time, is this a bipartisan consensus to have policies implemented today so that over the next five, 10, 15, 20 years we continue to use this abundance of energy and thus less of the time we have been given to put us in the right position and.

>> i do not know who wants to field this, but in this white paper, you cite that hydraulic fracking 5 should be regulated at the state level. can we talk about this? environmentalists and consumer groups talk about the growth of fracking. are the state able to do this? should they do this? >> i think the answer is absolutely, yes. there are some states that have really good and tight regulations. the most important thing we have to make sure that the american public continues to support the idea because we need this energy out of the ground. if there is a problem more some accidents and the country turns to side against it, that would be the worst outcome. we need to make sure there is a smart regulatory approach that does not withhold. we should be producing as much as we can when we can, but the roles of the road should be set. there are states that have very

smart regulatory approaches and there are some just getting into this business and are starting to think through these questions. we are advocating that states understand the resources better and they have the right agencies to do this. but just make sure that the best practices are shared with others and implemented. >> as a former governor, i always bristled a bit at the suggestion that somehow i was smarter today when i got up and flew up here just because i am in washington, d.c. i don't believe that. of course states can and should do it because some states may have a different attitude towards this in pennsylvania than texas. so you want to take into account many of these issues that are environmental issues and reassuring people locally about whether the procedures being used are safe and

reliable. often local people can do a better job of explaining that or they may not want as much of it. they may want less. i thinks states have a right to be wrong in terms of competence. i just went through a hearing the other day on this meningitis outbreak that we had where people were taking these bad injections with unsterile stuff produced by a massachusetts compound and factory and it was the tennessee department of health that found out and they saved lives. the fda was not looking too good. but yes is the answer to the question. the epa and the federal government have delegated a lot of the responsibilities for clean air and water to the states. they can have an overview for

that, but i like the idea of states doing it. >> get ready for some questions. i'm going to put you on the spot, just among friends here. are we going to go over the fiscal cliff? [laughter] >> this is off the record? >> just us. >> there is no reason the country should not be able to come together and overcome the dysfunction to have a broad, fair agreement revenues from those who can afford it most and the type of entitlement reform that we need to gather to be part of a balanced deficit reduction package. everyone has to realize

compromise is not a dirty word. there's just no reason. they're the reason it should come to that. i will connect a slightly to our discussion here in two points. one reason you want to have an agreement that does include the type of significant revenues and mandatory savings is that because we cannot come to an agreement on that, we continue to cut too deeply into some of the domestic discretionary where a lot of our investment in the future comes from. i agree completely with what senator alexander said about the and portents -- about the importance of our andy in breakthrough technologies -- of research and development that would not get funded simply because no individual actor can capture the benefits of the

research enough to justify meaning that we, as a country, are under investing and that is really important in our country. because we cannot come up with a big agreement and we keep cutting deeper and deeper into domestic discretionary spending, it just means not only in this area, and i age from other areas, but our ability to invest in research and the future is lessened and we are all poorer for it. >> i will make dinner reservations for new year's eve. you're telling me i will not be working. there is a hope we're going to avert this thing? where are the microphones? there's one right over there. >> i'm wondering the phrase "smart grid" does not appear in the report today. how does this fit into the

council's thinking? >> safe and the energy security leadership council has a long history of many policies. just because we do not mention it in this policy does not mean we have not said it before and that we continue to support it. what i say about these margaret, and i will tie this to the electric vehicle, for a long time, we believe the electrification of transportation is probably the best way to drive the smart grid. politically because it deals with the question of oil so acutely. republicans and democrats can get together. when people put an electric car in their rush hours.

suddenly their relationship to electricity prices means so much to them. during your dishes at 7:00 at night vs 10:30 at night and saving a few pennies will probably know not drive the american consumer to embrace and understand electricity in ways that have never done before, but putting a car in their garage, the idea is to spend a little bit capital upfront but you have a lower operating costs because electricity is so cheap. you put these in these deployments communities, and we believe that would be research and development, the petrie dishes of learning about consumers. as you put them in those garages, those are the communities that will be the fastest to upgrade the grids and make sure these margaret is a robust capability in their

community. >> over your arm the left. >> i want to congratulate you all. i am with the naval postgraduate school, but i ended up creating something we call the energy consensus for one- year to ask people to talk about energy when it was a forbidden topic in the defense department. this was through 2004. i got funding from the department of defense and it created the energy conversation. i want to get to a point that was brought up in number of times, having the american public understand this unbelievably complex story. i recommend you all watch alan alda's vido, "the flame." he asked what it was money was small and could not get an

answer. he went up was done every university and they put on a worldwide contest to explain what a flame is to 11 year-old. they had 600 submissions and 6011 year old evaluated this. keep in mind how complex that is. i bought a book two weeks ago called "black gold" for my granddaughter by albert marin. i recommend of the academics in this room or anywhere. not many people are going to read or understand your report. a lot of what needs doing telling this story as that it has to be visual because it is so unbelievably complicated, interdependence, integrated, and for most of us, it just looks like chaos. i'm going to suggest that you do things like kids were studying english working with those studying energy and that

their work as a collaborative effort to write understandable stories on these various elements of energy. the other thing i would suggest is that if the federal government, whenever they do any contract and, i had already asked belair to do this, but any contract not classified has to have a one-page list of bullets that are what i call new learnings. i'm sorry i went on for so long, but i have worked on this for so long.

>> thank you. >> i do like the idea of those bullet points. they're doing that for mortgages now. back here. >> . arm from national defense university. i agree with your conclusions that the energy outlook is much more positive than two years ago, but, if i may, i want to question two functions, one of them, the difference between boulder ability and [inaudible]

what happens in china and india will affect the united states. we will never be independent in a global market. many of you talked about countries that do not wish us well. basically, opec countries. these countries, in my opinion, have been very cooperative. libya, kuwait, uae. they have all helped us contained iran. they have some connection with an 9/11. our relationship with these countries have been very good. >> i think it has been said what you said in your first point. the fact that we may reduce the amount of oil we import, it does not decouple was from the world oil market.

canada and norway are both exporters, but their citizens pay of the market price for a gallon of gasoline. we said exactly what you said on your first point. on your second point, the opec nations in being friends of the united states, i think the answer to that is that both sides have had a relationship that has been economically necessary, but i do not think the opec cartel conducts its affairs in a way to benefit the united states of america. they conduct their affairs so that they do not kill the goose that laid the golden egg. if you turn into the record on pages 8 and 9, you're asking

for some visual clues as to what's going on here. if you look on page 8 coming will see the united states is paying about $20 million per month to import petroleum. you see the sharp rise in the line just before 2008 and then it sort of flat lines from 2008 going through the significant dip that was represented by the subprime mortgage meltdown. what's interesting about it is from that point forward it has remained about 50% of the balance of payments and deficits. that is because the oil cartel prices the marginal barrel of oil as what it costs to get it out of the ground and what the maximum is that they cannot pay without tipping the consumers

over into a recession. the chart on the next page to the right of that shows it even more clearly. as you can see, the blue lines there, right before 2008, the meltdown, we went up to $147 per barrel for oil. that was the match that let off the subprimal down because the subprime borrowers, who probably should not have bought that house to begin with and maybe you were taken advantage of were literally reduced to making the decision not between buying gasoline to go to work for defaulting on the mortgage. you see a precipitous drop in the dark blue and here it goes back up. we are now at over 6% of our gdp spend of petroleum.

as mr. sperling said, they reduce to the payroll tax last year, in 2011, amounting to $108 billion. it's not by accident of the price of fuel went up and consumed our disposable income in this country. as you can see, the light blue bar, the only way to solve this problem is not to get divorced from the global economy, as canada and norway has showed some it would not make a difference anyway. we need to diversify transportation so that it is not as dependent upon petroleum as is currently the case and this redline on page 9, probably the most important of all, the amount of oil that we can assume per $1,000 of g.d.p. if we can diversify into compressed natural gas and come up with a viable electrification and of trucks and vehicles, those are profound developments which were not possibleas mr. sperling said, u. the report that we have here house all three of those

things, the maximization of oil. it into saudi arabia levels mean we produce 11 million barrels. at the same time, driving down consumption and, fuel efficiency standards, electrification, natural gas, and continuing research and development that sutterville is and was talking about in the hopes we could take a biofuels to fly in airplanes and drive trucks to get them into scaled production that would be cost- effective. if we do all three of those things, we have a real

opportunity to change the economic dependency of this country and certainly the national security risks that we continue to have with a black swan events like saudi arabia becoming a state that is controlled like a theocracy like iran or something. >> let's get one more here. smith curious what mr. thinks about the conversation between senator alexander and gene sperling about research and development. the price of plasma televisions fell 20 full and it really was not a matter of research and development does it was staley on deployment. how much do we have to focus on new technology, getting into scale land to a point where they are produced in volumes such as prices can decline and be accessible to more consumers and create a virtuous cycle but there has to be a balance and a curious where you come down on

that. >> we live normal fruits of research and development that has been conducted in years past, some by the government, in terms of their plans come a jet engines, the internet, so forth some of it was done in private research and development laboratories, like bell labs. the japanese industry and the japanese government has been very active in this area. i would say to you the global revolution creating the improvements in lithium ion batteries which was helped at mit so this is just one big world of intellectual property and that has led nissan leafs to be built in tennessee.

the electrical power grid that was mentioned would provide the power. let me give you a "gee whiz" statistic. there are too ordered 50 million light duty cars and trucks in the united states and we have enough power-generating capability that if you could wave a magic and have a smart grid and all those vehicles were converted to electric power, which converts into energy at a rate of over 85% vs. less than 20% for an internal combustion engine and, you would not have to build another power plants in the united states of america.

with the natural gas revolution that is under way, we have a plentiful supply for electricity to move a significant amount of the 10 million barrels of oil per day we consume in light duty trucks and vehicles and to hybrid or hybrid-electric power and reduce our consumption overall by millions of barrels of oil per day thereby reducing the amount that the economy expounds on petroleum per unit of gdp. that's the goal here. >> you have to have a cheaper battery. asre not going to sell a lot long as the batteries are so expensive. >> i think the research and development, senator, is absolutely essential on batteries and biofuel-scale production. those two areas are the most important, but i have to tell

you krupa an incredible piece of machinery is the chevy volt. it will produce 35 miles of transportation on electric power and then you have a range of 350 miles an days sell about 3000 of them per day -- excuse me, per month. i know my friend would like to be selling 3000 per day. i think improved battery technology is on the trajectory and that is the holy grail, pier electric. i think a lot of progress is being made here, but the recommendations we have here have the best chance of achieving a kind of breakthrough. >> it's a great point that there are a lot of different types of fuel.

ireland ceo of a garbage company and we take the waste to produce every day and one company produces eight times the amount of power from waste than the entire solar industry. there's no company investing -- and we get about 50-60 of the btu content. there's no company introducing more on how to get 100% than ours. you have a lot of technologies that absolutely working on that you have to build these plans to scale. who will take that kind of risk? it's a great point that if we're going to help in new technologies, it is not just about research, development. we have plenty, but now we have to risk $100 million to see if it works to scale. no matter which way you go, we happen to be going compressed natural gas, but where do you fuel these trucks? building that infrastructure this year, we will spend about $50 million on building our own cng plants.

most of those we will make available to the public so taxicabs and buses can fuel there, but that is another place we could use help. how do we build the data structure when we move to these fleets that we can have an infrastructure to support those leads? we happen to be doing it on our own. it does not make a lot of economic sense in a lot of areas, but where we can get our own feeling station, that's an area where we could use help building an infrastructure to make it more economic. i think your point is absolutely well taken. there's plenty of technologies out there, and we do not know if they will scale. that is where we could use help, defraying the initial build out risk. >> i did the very important to understand, and the heavy- vehicle side, a mention 10 million barrels per day consumed by light-duty vehicles and 300 million are consumed by the over the road trucks, buses,

garbage vehicles. the over the road sector today is paying close to $4 per gallon for diesel fuel. the natural gas equivalents is under $2 per gallon, so there is a huge economic incentive. until recently, there were not engines that could efficiently use lng, cummins and others. infrastructure is being put in by shell and ta, the second- largest truck stop system, and by clean energy, mr. pickens company and pilot and flying j. there are a lot of things in this area that are moving in terms of heavy-duty vehicles in terms of natural gas and light duty vehicles are moving towards electrification and hybrids.

>> our biggest problem with the natural gas in the structured are people with a gasoline- powered engines to ask if they can buy our gas for $1.99 and we have to tell them that it's a different kind of gas. >> on that note, i think we will leave it there. a big round of applause for everyone on the panel. thank you so much for spending time with us this morning. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2012] >> president obama marks 20 years since russia and the u.s. agreed to secure nuclear weapons in the former soviet states. in 20 minutes, and look at the

tax deductions that a part of the negotiations over the so- called fiscal cliff. then a hearing on rising optimism rates. -- austim rates. president obama american samoa warning syria's president there will be consequences if he were to use chemical weapons on his own people. the comments came during a speech marking 20 years since russia and the u.s. agreed to secure nuclear weapons in the former soviet state. leon panetta introduced the president at the offense. -- at the event. >> thank you. [applause] good afternoon. senators, distinguished guests, ambassadors and officials, thank you all for being here today.

i am honored to be able to participate in this symposium marking the 20th anniversary. let me thank the university for their great work in organizing today's conference. it has been a day to reflect on the successes that have been achieved in non-proliferation over the past two decades through the program, and it has been a particular honor to be when the company of senators whose leadership has made this possible. we can stay the course of history change for the better because these men helped the nation confronts the threat of nuclear proliferation at the end of the cold war.

the world would have been a far more dangerous and threatening place were it not for these patriots. earlier this afternoon i was honored to be able to present the distinguished public service award, the highest civilian honor. he has made the world safer and more secure. you have a profound gratitude for the nation and global community. i want to thank my deputy, who played a critical role in working with the senators on their legislation, established a program in the early 1990's as an assistant secretary of defense, and continues that effort in the pentagon.

it is also important that we use this to generate new thinking and new ideas for how best to carry this vital vision into the future. it is important to have this discussion because the program is at a critical inflection point. it has evolved from a focus on infrastructure in the soviet union to encompass a broader range across asia and africa and the middle east, and despite the success achieved in the former soviet union, this program remains as critical as ever and maintains a strong support of leadership. it also has the strong support of our special guest today. we are honored to serve in his cabinet and honored to introduce.

president obama has been a leader in reducing the threat of weapons of mass destruction. he has been a leader since he joined the united states senate and partner closely with senator dick lugar. as president, he has set a visionary agenda and to achieve a world without nuclear weapons and has taken practical steps to move the world in that direction. he has helped renew america's global leadership, and he has helped advance the cause of peace and security in the 21st century. it is my honor to introduce our commander in chief, president barack obama. [applause] ♪

>> thank you very much. thank you so much. everybody, please have a seat. good afternoon, everybody. it is wonderful to be back. thank you for the introduction. last week at the right house, we had our first meeting since the election. it was a chance for me to thank my entire team for their service for keeping the country safe and strong. few have done more than you in that regard. that includes taking care of our remarkable men and women in uniform and their families.

keeping our military the best in the world, bar none. thank you for being such an outstanding secretary of defense. [applause] i am not here to give a big speech. i wanted to come by and join you in marking the 20th anniversary of one of the country's smartest and most successful national security programs. people in this room conceived it and build it. i want to acknowledge a leader who now helps guide the secretary of defense. thank you for your great work.

[applause] you have to think about what real visionaries do. you look at the world and see what is missing. they set out to fill the gap. to build something new. to imagine after decades of confrontation how our nations might engage in cooperation. early in the cold war, einstein warned of the danger of our wisdom not keeping pace with our technology. our wisdom began to catch up. i want to be here because my own personal debt to these two leaders. when i was elected to the senate, one of the first leaders

i called had an extraordinary reputation for his work on a whole range of issues in the senate. thank you for taking my call. [laughter] we do small talk. he congratulates me on being elected. he says, i have two pieces of advice. the first, get a seat on the foreign relations committee. i did that. the second, learn from dick. i did that, too. i took his advice then and as president, i continue to value his advice. sam is one of the four-horseman, a pretty honest nickname. he has spoken out for a world

without nuclear weapons. with your nuclear threat initiative, you help us ratified a new treaty, rally the world to secure nuclear materials, strengthen the regime and create an international fuel bank for peaceful, nuclear power. that is an extraordinary legacy. thank you for your partnership and leadership. [applause] because i took his advice, i came to know and admire dick. i was a junior senator but he was willing to take me in and on the issues we are celebrating today, took me in as a pupil. i watched and learned and when we worked together to pass a law to speed up the lockdown of

nuclear materials, it was called lugar-obama, in that order. [laughter] i want to take this opportunity to say something else. one thing we have shared is the notion of what public service should be. it ought to be more than just doing what is popular at the moment. it is about doing what is right over the long term, problem solving, governance, and not just how we can score political points on each other or engage in obstructionism. where compromise is not a vice. that is the bipartisan tradition we need more of in washington, especially on foreign policy. as you prepare to leave the senate you love, i think i speak on behalf of everybody here and

millions of people across the country when i say your legacy will endure in a safer and more secure world and a safer and more secure america. we pray this nation produces more leaders with your sense of decency and stability and integrity. we are grateful to you. thank you very much. [applause] i will point out it was the coup took me on my first foreign trip as a senator to russia, ukraine, and we were there to see the cooperative production program in action.

the first thing i learned is when dick travels overseas -- we did not stop and look at beautiful sights and lounge around. he wore out every 25-year-old staffer. what you also learn is dick -- the more remote a place is, the more obscure the facility is, the bigger a rock star dick is. [laughter] they love him. i remember walking through one facility. i leaned in for a closer look. they said, do not touch that orange stuff.

at another point, i am thinking, why do we not have masks on? this is the kind of trip you take with dick. [laughter] land mines, technicians showing off test tubes. you ask, what is that? "anthrax, a plague." "should you not keep it in something more sturdy than this?" dick is standing in the back of the room. [laughter] i asked him if he has seen it. he says, i do not get close to it now. visiting those facilities seeing the work so many of you do, seeing these weapons once aimed at us now being turned into scrap, surely brought home how important this work was.

this is one of our most important national security programs. it is the important example of the kinds of partnerships we need. working together to meet challenges no nation could address on its own. it is a foundation for the vision i laid out. nations come together to secure nuclear materials. we build on and continue to work to reduce arsenals. we strengthen the nuclear -- over time, we come closer to our ultimate vision. a world without nuclear weapons. that is why we have not just sustain programs for the past four years.

we have worked with all of you to strengthen. expanding it to 80 nations. partnering with others, companies from africa, to prevent the spread of diseases. i have to give a shout out to someone on the original team. he has been working ever since. we are very proud of her. [applause] we worked to keep weapons from spreading, whether it was nuclear materials in libya and or now. we will continue to support the legitimate aspirations of the syrian people, engaging with the opposition, providing them with humanitarian aid, and working for a transition to a syria that is free of the regime.

today, i want to make it absolutely clear to assad the world is watching. the use of chemical weapons is an would be totally unacceptable. if you make the tragic mistake of using these weapons, there will be consequences and you will be held accountable. [applause] we simply cannot allow the 21st century to be darkened by the weapons of the 20th century. over the last four years, we made critical investments in our production programs. energy, state, and we have been increasing funding and sustaining it. even as we make some very tough fiscal choices, we will keep investing in these programs.

our national security depends on it. after all, even with all of your success, the thousands of missiles destroyed, bombers and submarines eliminated, the warheads deactivated, we are nowhere near done. not by a long shot. you all know this. there is still much too much material being stored without enough protection. there are still terrorists and criminal gangs doing everything they can to get their hands on them. if they get it, they will use it. killing hundreds of thousands of innocent people. that is why i continue to believe nuclear terrorism remains one of the greatest threats to global security. working to prevent nuclear terrorism will remain one of my

top priorities. i came here in part to say we cannot let our guard down. there needs to be a sustained effort across all of your organizations across our government. we have to keep investing in our people and in new technologies. we are joined by some of our russian friends today. russia said our current agreement has not kept pace. let's update it. let's work with russia as an equal partner. let's continue to work. i am optimistic we can. we have to create new targets. i know you are committed to this. i want you to know that i am, too. let me leave you with a story of the first trip dick and i took together. you may remember this. i was in the ukraine. we went to a facility. we walked down these long, dark

corridors. we are ducking our heads. stepping over puddles of something. we were not sure what it was. [laughter] we came across women sitting at a work table with a pile of old artillery. women were sitting there, taking them apart. by hand. slowly, carefully, one by one. it took decades to build those arsenals. it will take decades and continued investments to dismantle them. the two of you know this. i want everybody who is participating in this to know that the work you do is absolutely vital to our national security and global security. missile by missile, were ahead by warhead, shell by shell, we are putting an era behind us.

we are moving closer to the future we seek. a future where these weapons never threaten our children again. a future where we know the security and peace of a world without nuclear weapons. i could not be prouder of these gentlemen. i am proud to call them friends. i look forward to continue to work forward with them and all of you in the years to come. thank you very much. [applause] ♪ ["the stars and stripes forever" playing]

>> >> on tomorrow morning's washington journal, tom cole discuss a little -- the latest with the fiscal cliff negotiations. republicans and joined obama to extend the bush era tax rates. first time university law professor looked at the history of the alternative minimum task -- tax. cluster e-mails, phone calls and tweets. tuesday at 7:00 a.m. eastern on c-span. more about the tax loopholes and deductions that could be involved in negotiations over the fiscal cliff. from our special washington journal series, this is 50 mins.

>> we turn our attention today to deductions and tax -- tax loopholes. joining us to talk about this is john mckennan, thank you for being here. what are loopholes and deductions? we hear those words a lot. guest: loopholes or tax breaks of all different sorts. whether you like a particular loophole or not depends on where you sit. there are lots of loopholes that are deductions. deductions are the ones most people are familiar with. the big itemize deductions are things like a home mortgage interest deduction. there is one for state and local taxes that is very important. the deduction for charitable contributions.

then they're all kinds of other breaks that exist in the tax code that people are less familiar with. there are some most are not aware of at all that are very big and important. for instance, the health care we get at work represents a big source of income to allow the people. but it does not count as income on your taxes. that is a giant break in itself. it is known as an exemption. they're all kinds of other breaks that exist. the current income tax credit goes to the working poor. then folks with children get a child credit. it is worth a thousand dollars per child right now. there are lots and lots of different kinds. congress loves tax breaks. >> is there a difference but in

a deduction and a tax credit? >> a deduction you take off of your income. a credit is something that typically taken away from the tax that you owe. if you owe $20,000 in tax and get $1,000 tax credit, you're down to $19,000. host: is loopholes a term that congress likes? guest: they are talking about things they would like to get rid of or scale back. tax breaks are a little bit more neutral. host: are there any sacred cows in deductions? guest: definitely. almost every tax break has a constituency. when congress starts to think about getting rid of some of these things, the constituencies, out of the woodwork.

a classic example is the home mortgage interest deduction. there is real estate in every congressional -- you'll hear from a lot of people about it. host: it cost the government about $100 billion. who benefits? guest: realtors, home builders. host: is the average american seeing a benefit? guest: everyone with enough

wealth to be able to buy a home will benefit from this break. in terms of the percentages, people in the middle class and upper middle class benefit the most from this. there are limits on your ability to deduct home mortgage interest if you are extremely wealthy. rich folks do not benefit as much as folks in the middle class. something that benefits just about everybody who pays the taxes. it is beneficial for people in the high tax states. they tend to be on the east and west coasts and in more affluent states. they tend to be blue states, as well. host: charitable contributions.

who uses that? guest: that tends to benefit a broad range of people. it is surprising how people at the lower and giveaway. wealthy people donate allied. mitt romney gave away millions and millions of dollars. host: things like capital gains dividends and other things that benefit wealthier in comes? guest: the caplet gains and dividends is the classic break that benefits the wealthy. they think it is correct if they receive more than 90% of the benefit.

people and the middle class get a little benefit from that break. the majority of the break goes to the wealthy. host: there is a recent story from politico. host: how significant of these deductions? guest: they can be important. the goal is to not get rid of the budget deficit. lots of people do not want to get rid of the budget deficit. they want to get it down to a manageable level. opinions differ. you can make a big dent through closing or reducing the loopholes.

host: do you expect them to play a role? could they end up on the chopping block? guest: republicans have put them on the table. i think you probably will see some of both. this is a process that will go on for the better part of the next year. during that process, you will see some of both. host: john mckinnon is a reporter for "the wall street journal." here are the numbers to call.

republicans, 202-585-3881. democrats, 202-585-3880. independent callers, 202-585- 3882. let's go to the phones. >> we are so focused on how to move raised taxes? we have it fiscal cliff at the end of the year because we are near a debt crisis. driven by too much spending. everyone was the focus on how can raise taxes. we should be focused on how to get spending under control. we have a spending problem. we should be focused on what

really matters. the debt crisis means the economy collapses, we have people out of work. it means we do not have money to pay for basic benefits for medicare and social security. it is important to talk about deductions and tax policies in terms of tax reform. john vader opened the door for that. president obama has in it -- john boehner opened the door for that. president obama has indicated no intention of looking at -- . host: what deductions would you host: what deductions would you put on the table? guest: tax reform is not to raise revenue. is to make the tax code less of a drag on the economy. we do that by lowering tax rates and getting rid of some deductions, exemptions, credits. but we do not do it to raise

revenue. host: chuck marra, how important our deductions? guest: they are very important. if you get into this notion that they are loopholes, then you look at the very popular deductions the people rely on. they're trying to balance the economic weakness with the long- term needs of the economy, which is that we do face a future of deficits that are unsustainable. we are trying to stabilize the debt has a share of our economy over time. that means about $4 trillion in savings. the good news is, last year, the congress and the president got together and locked in about $4 trillion of spending cuts. it has to be enacted. we're talking about 40% of the spending budget.

that includes the defense budget, and other non-defense spending. all of that spending will be squeezed over 10 years by 15%. that locks in $1.5 trillion and we have another $2.5 trillion to go. the president is saying, let's let the middle class go forward to support the economy, but let's take the high end of tax cuts and let them sunset. we will generate $1 trillion in savings over the long term. if you have the $1.5 trillion in spending cuts that is already there, and then you add about $1 trillion with the tax cuts, and then you have about $1.5 trillion to go.

the remaining is medicare, medicaid, and social security. you see a dynamic where the tax deductions are being weighed against medicare and medicaid. medicare and medicaid can only take so much of a hit. host: if you like to join the conversation, here are the numbers to call. let's take a look at some of the deductions that are in the tax code. the mortgage rate deduction is nearly $100 billion. that is a homage because when americans take that deduction on their mortgage. also state and local income taxes, $54 billion. the charitable contributions, $51 billion.

the exclusion of pension benefits, $162 billion. and capital gains, $71 billion. do any of those numbers stand out to you and in particular? guest: you have picked out the largest ones. when people say locals, they are not the polls. they are major deductions. those are the primary deductions in the tax code. take each one and if you think about the mortgage deduction, the terrible, those are things that should be reformed, but it is unlikely that they can be eliminated by some people are talking about. it is first things first. let's get the high-end bush tax cuts to expire. let's lock in the savings and look at what we can do about deductions. the mortgage deduction is not well designed. if you think about the way it works, if you are a banker, because it is based on your tax rate, let's say, you have a $1 million house.

and then you have a teacher with a $200,000 house. what happens is the taxpayers actually subsidize the mortgage of the banker at 35 cents on the dollar. and only 15 cents on the dollar for the teacher. that does not make a lot of sense. there is room to reduce the subsidy rate for the banker. that is what the president has proposed, to cap those deductions of 28%. that is a step forward. and it is on top of letting the bush tax cuts expired and then protecting medicare. host: what you think about what he is saying in terms of the with the mortgage deduction works? will people see a benefit? reformif we're going to mortgage deductions, we would be doing it as tax reform. that is what tax increases will do if we do not care of them with some kind of spending reform.

republicans have offered a loophole closing, to use the generally accepted term. it is not going to stop the drive for higher and higher tax rates for the future. it would be an intermediate step for higher taxes coming down from higher rates. we need to focus on what matters, which is getting spending under control. chuck mentioned reducing debt by about $4 trillion in the next 10 years. that is the president started. i think it came out of simpson- bowles as well. however, it seems to be inadequate. the president says we are going to add $9 trillion in debt over the next 10 years. but his tax increases would only bring in $1.6 trillion gerbera

still almost $8 trillion been added to the debt. we will be right back in the same situation. what the next step? the president has not offered anything. democrats have not offered anything. just raising taxes does not get it done. host: we're going to hear from steve on the republican line. caller: i agree that all the tax cuts and all the -- you know, unless they reduce spending, it is not going to do anything. we need to create more jobs. if we keep taxing the businesses, they should just reform the tax.

if a business hires so many amount of people, they will get a deduction if they hire that amount of people. that would work. i am from buffalo. years ago, they had bethlehem steel. we have the wiper place -- i cannot remember the name, but anyway, the state gave them a tax breaks for hiring people. they start hiring people. you have to have income to spend money. the government needs more taxable people. it is like a bank account. if i give you $1 million and your spending $2 million and only taking in half a million dollars, it is not going to balance. host: do you take deductions? caller: i don't make enough money to take them. every time i try to take them, they say, you did not make enough to take that out.

host: what do you think of that? caller: like i said, if they want my money, that is ok. let me put it to you this way. i do not mind paying more money if i'm working. then i have the money to pay. by not working, i do not have money to give. do you understand my point? guest: i think some of the deductions are reasonable and fair and others are flawed. i think it is biased toward high-income people. he makes the point that we need to focus on jobs today. employers do get a tax break if they hire people. the problem is, republicans are trying to will the middle class tax cut hostage for the high income ones. we need to get those extended, the middle class ones, for the short-term. and let the others expire.

guest: we need economic growth. that is one of the best ways to get our debt and deficit under control. investors and small business owners are really who you hit when you hit the top two rates. we need to get the economy going to help get the deficit down. the caller said he did not take deductions. we should point out that everyone takes a standard deduction. whether it is an itemized deduction or a standard deduction, you are still taking a deduction for the taxes for the year. host: tax cuts expiring at the end of 2012, allowing high income tax cuts to expire would reduce the deficit by $950 billion over 10 years. this is from the center for budget and policy. guest: that is a stigma of an

amount of money. that is nearly $1 trillion. if the target is $4 trillion, then we can do that. all the republicans need to do is to pass the middle class tax cuts and support the economy today, and allow the higher income tax cuts to expire with minimal risk to the economy. guest: we are still adding $7 trillion in national debt over the next 10 years you raise the taxes on small business and investors, you'll get slower growth. the $4 trillion is not enough. we need to be looking at the bigger number, which is the $11 billion that the congressional budget office tells us we are running over the next 10 years. higher taxes are counterproductive and they do not lower the deficit enough to make a dent.

we need to focus on cutting spending. and the drivers of a of the spending problems and the next 10 years are specifically social security and medicare. those programs have an unfunded liability of $47 trillion. that is what they would need to pay today for future benefits. host: looking at specific aspects of what is at stake with the so-called fiscal cliff. go to c-span.org/fiscalcliff for a clearing house of stories about it. speaker john vader was talking about negotiations yesterday. let's talk about where he sees things. [video clip]

>> the president's idea of a negotiation is to roll over and your guy asked. we need to find common ground and we need to find it quickly. >> again, because you kind of did not answer it the first time, what are the chances that we will go over the cliff? >> there is clearly a chance but let me tell you, i might be an easy guy to get along with. obviously, i've worked in a bipartisan way on a number of agreements. but i am determined to solve our debt problem. and we have a serious spending problem and is going to be dealt with. >> and if the white house is unwilling to deal with it, are you prepared to -- >> we are going to deal with america's debt problem. >> and if they do it in a way that is unacceptable to you? >> we are going to deal with it. we are not going to kick the can down the road anymore.

>> so if he kicks it, you're going over the cliff? >> i don't want any part in going over the cliff. host: where republicans are bargaining in terms of looking at the tax code? guest: they have offered that. the speaker boehner came out right after the election and said he would look at revenue. he said, let's lower tax rates, but expand the tax base. you put that on the table for the president. that is at least the second time. host: and what the polls would be taken out? guest: it depends on the process that they go through. the biggest loopholes are by far the exclusion for health insurance. if you are going to design a

system from scratch, intertwined the health insurance system with the tax system. we cannot change it overnight and expect it not to collapse. we would need to create some kind of credit for individual health insurance. we should not be taxing savings. you can exempt savings or exempt the yield you get from savings. we would not close that again for raising revenue. it comes down to the political process as to how you are going to get rates lower. but again, the offer is out there from speaker boehner. the president has not taken them up.

host: treasury secretary geithner was on abc this week. let's take a look. [video clip] >> i think we are making a little bit of progress, but we are still some distance apart. what we are trying to do is not just prevent a tax increase on 98% of americans. and there is no reason we cannot do that. but we are trying to go beyond that and look at what is good for the future of the american economy. >> you say you are getting closer. they say you are getting much further apart and that this is not even a serious proposal that is designed to fail. >> we think we have a very good mix of tax reforms to raise taxes on the wealthiest americans, combined with a very comprehensive, very well designed, very detailed savings to get us back to a place where it is sustainable.

if we can do that, we can create some things to make us stronger, like rebuilding american infrastructure. we think those are good investments in america. host: what do you think? guest: the president is in a very strong position coming off the campaign. he had a detailed plan before the congress that has wide support. the problem for speaker boehner is that he's in an untenable position. he's saying, let's hold the middle class tax cut hostage to try to get leverage. the higher class tax cuts are very popular. and speaker boehner has talked about loopholes and medicare that he wants to cut, but he has not laid out specifically which ones he would cut.

he has not been deposited at all on medicare. the president has been specific on all of these things. guest: we had the right and budget, which was very specific on all of these things. -- of the paul reihan budget, which was very positive on all these things. democrats hammered those cuts as a savage. they hammered them again when it came out with reconciliation cuts. we forget that the republicans passed two bills that take care of the fiscal cliff. they extend of the tax cuts and a change the sequestration. the democrats hammer them on that each time. they are not going to give the democrats a chance to hammer them once again.

host: our democrats putting deductions and loopholes and specifically on the table? guest: yes, the president has been very specific. he has said, first things first, let's let the high end tax cuts expire and lock in these trillion dollars savings. then he says on deductions, let's cap the major ones, the mortgage interest, the charitable, the state and local. the banker's comments of getting 35% subsidy on the mortgage, he will get 28%. and then there are tax cuts in medicare, but they are reasonable. if you do not do these tax deductions and you do not do the high end incumbent bush tax cuts, it gets in devastated. the ryan budget was very back loaded. and it was not in the first 10 years. there are trade-offs. there are trade-offs.